Tag: TDS

Tax Query: How to get TDS certificate from mutual funds?

Personal Finance

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I have a few doubts with respect to my ITR for FY 2020-21 i.e. current AY 2021-22. I have invested ₹20,000 in Templeton India Equity Income Fund in 2006 under NFO. Since then periodical dividends declared under the scheme are getting credited to my savings a/c through ECS regularly and are accounted for in my ITR returns of the respective financial years. Since the Finance Act 2020 is modified and the dividends are now taxable in the hands of investors, the mutual fund has deducted TDS and paid the balance of the dividend to my savings account. Since I have not received Form 16 A for the TDS made by the mutual fund, I have sent a mail to the RTA of the MF. Initially, they have asked for a self-attested copy of my PAN card which I have provided to them. Now the RTA has replied that my PAN was not registered in FY2020-21 with them and was registered subsequently and hence, they are unable to fetch the TDS certificate for the FY2020-21. Since, the TDS was deducted on the dividend amount paid to me, kindly inform me how I can obtain TDS certificate and show them in my returns.

I also request you to kindly inform me how to show them in the current ITR in the absence of Form 16A.

Further, I am a retired pensioner and an amount of ₹15 lakh is invested in PMVVY Scheme and am receiving quarterly amount. Please clarify under what head should the amount be shown. Apart from my pension, during the year I have incomes including interest on bank deposits, dividend income from shares and MFs, interest income from NCDs, sovereign gold bonds, savings bank A/c, infra bonds, interest on NHAI tax-free bonds and short term & long-term capital gains. I have one self-occupied house property. My total income during the year is less than ₹50 lakh and I do not have any agriculture income. In the light of the above, I request you to kindly inform me which ITR return I have to file?

Rama Krishna

Dividend shall be taxable under the head ‘Income From Other Sources’ (IFOS) as per the Act. If your PAN is available with brokerage company/fund manager, the taxes deducted would be reported in your Form 26AS based on which the TDS credit can be claimed in the tax return. Where the company has not deposited the TDS/filed the TDS return, due to absence of your PAN details, you are required to complete the KYC formalities and provide the scanned copy of PAN to enable them to do the needful.

Pension income earned from Prime Minister Vaya Vandana Yojana Scheme (PMVVY) of LIC of India is fully taxable and shall be reported under the head IFOS. Please be informed that bank interest, dividend income from shares/mutual funds, interest income from infrastructure bonds, NCDs and sovereign gold bonds shall be taxable under the head IFOS. Short term capital gain/long term capital gain on sale of shares needs to be reported under the head capital gains.

Considering your income pattern, you are required to file ITR 2 for the FY 2020-21.

In the issue dated September 5, 2021, you have mentioned that if money is gifted to relatives, any interest earned out of that will be taxed in the hands of the recipient only. In a similar manner If shares allotted in an IPO are gifted to spouse, and if they are sold within a period of one year, will the short term capital gain be taxed in the hands of the recipient of the gift? If yes, what sort of record should be kept?

Niranjan

Your spouse is not required to pay any tax on receiving shares from you as a gift. However, Section 64(1)(iv) of the Act provides for clubbing of income in the hands of the transferor when assets are transferred for inadequate consideration. Providing gifts to your spouse would amount to transfer for inadequate consideration. Accordingly, any gains arising from sale of such shares is taxable in your hands. Besides documentation evidencing cost of acquisition of shares, sale consideration, selling expenses, etc., and documentation related to gift (like gift deed) needs to be kept on record.

The writer is Partner, Deloitte India

Send your queries to taxtalk@thehindu.co.in

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How banks, mutual funds and companies will check if you have filed ITR, BFSI News, ET BFSI

Banking & Finance

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Effective from July 1, 2021, a person who has not filed ITR for the previous two financial years and the aggregate TDS and TCS deducted from payments made to him/her in each of these financial years exceeds Rs 50,000, then such person would be subjected to higher TDS rate.

Deductors of TDS/TCS like banks, mutual fund houses etc can now check if you have filed ITR when your income crosses the TDS limit from July 1, and levy two times the TDS amount if you haven’t filed your tax return. For this purpose, the income tax department has launched a compliance check utility for tax deductors on the department’s reporting portal. Further, the tax department has prepared a list with names of taxpayers who have not filed their ITRs for the previous two fiscals, which can be used by deductors.

Here is a look at how financial institutions will check if individuals have filed ITR or not to see if higher tax has to be deducted from their income. Also, what a taxpayer can do if their name appears on the list of those who haven’t filed ITRs for the previous two years.

When will higher TDS/TCS be levied?
As per the announcement made in Budget 2021, if an individual satisfies the following conditions, then he/she will be subjected to higher TDS/TCS rate:
a) If the individual has not filed income tax return in the two previous financial years for which due date has expired as per section 139(1) of the Income-tax Act, 1961 and
b) Sum of TDS and TCS in each of the financial years is more than Rs 50,000

Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, “If for the relevant financial years an individual has filed belated ITR or filed ITR in response to a notice from tax department, then Section 206AB would not be applicable. It would mean that higher TDS would not be deducted on incomes.”

Compliance check utility for sections 206AB and 206CCA
As mentioned above, a compliance check utility has been launched on the income tax department’s reporting portal: https://report.insight.gov.in/reporting-webapp/portal/homePage.

Here, if an individual comes under the purview of TDS, i.e., his income exceeds the specified limit, then the financial institution such as bank, mutual fund etc., would check if the tax on the income accrued would be deducted either at the normal rate (if the above-mentioned conditions are not satisfied) or at higher rate as mentioned in the newly enacted law.

For instance, if the interest income from fixed deposit during the FY 2021-22 exceeds Rs 40,000 in a financial year, then tax would be deducted on the interest income.

As per the circular, the tax deductor or collector can enter single PAN or multiple PANs of the deductee or collectee on the reporting portal. The deductor or collector will get a response from the reporting portal if the TDS on income of such a person would be deducted at a higher rate.

As per the functionality offered on the reporting portal, a list of persons is prepared by the tax department at the start of the financial year 2021-22. This contains name of taxpayers who have not filed ITR in the previous years, i.e., 2018-19 and 2019-20. These two financial years are taken as the relevant previous years where ITR was not filed and aggregate of TDS and TCS exceeded Rs 50,000 in each of the financial years.

Can your name be removed from the list?
The tax department’s June 22, 2021 circular states that if the specified person, i.e., the person whose name has appears on the list, files ITRs for FY 2018-19 and 2019-20 during the financial year 2021-22, then his name would be removed from the list. Wadhwa says, “The due date of filing ITR for FY 2018-19 and 2019-20 has expired on 30-11-2020 and 10-01-2021 respectively. Thus, an individual cannot file ITR now, unless a notice is received from the income tax department to file ITR.”

If the taxpayer files valid ITR (i.e., filed and verified) for FY 2020-21, then his/her name would be removed from the list. Wadhwa says, “A taxpayer should ensure that once ITR is filed, it is immediately verified. The name from the list on the reporting portal would be removed either once the due date has expired (i.e., after September 30, 2021) or date of filing valid return (filed & verified), whichever is later. Thus, if you have filed and verified ITR before the expiry date (September 30, 2021 for FY 2020-21), then your name would be removed after the expiry of deadline. However, if you file your ITR, say on September 25, 2021, and verify it on say October 15, 2021, then name from the list would be removed from the list after October 15, 2021.” As per income tax laws, a taxpayer can verify his/her return within 120 days of filing ITR.

However, no new names would be added to the list. Wadhwa says, “This would mean that banks, mutual funds or any other deductor would check only once during the FY 2020-21 at the time of deducting taxes from the income accrued. If the name does not appear on the list, then such deductor would continue to deduct taxes at normal rates throughout the year. However, if higher TDS is applicable and ITR for FY2020-21 is filed during the year, then individual would have to inform the deductor, i.e., bank, mutual fund etc. to check the list again after filing ITR and deduct TDS at normal rate.”



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Tax Query: TDS on capital gains for NRI investing in MFs with power of attorney

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My son Prabaharan is an NRI. I am investing in mutual funds for him basis a power of attorney. The payment is made from the joint savings account of Prabaharan and myself (Indian resident account). In the circumstances stated above, is it necessary to deduct TDS from the capital gains?

K. Ramachandran

As per the provisions of section 196A of the Income-tax Act, 1961 (‘Act’), every person responsible for paying to Non-Resident any income in respect of prescribed mutual funds, shall deduct taxes at source (‘TDS’) at 20 per cent on such income, at the time of credit or payment whichever is earlier. I understand that your son is the legal owner of the mutual funds and qualifies to be a non-resident in India and is receiving income in the nature of Capital Gains on transfer of mutual funds. As per the above-mentioned provisions, TDS would be deducted by the payer at 20 per cent of such Capital Gains at the time of credit or payment, whichever is earlier. Please note that for your query, I have not analysed and commented on any exchange control regulations / legal aspect.

My father (aged 61 years) retired in March 2020 and invested ₹15 lakh in senior citizen savings scheme in post office in May 2020. Is the amount invested eligible for 80C for all the five years, or it is only for the first year? Is the amount enough to fulfil the entire ₹1.5 lakh limit under 80C for all the 5 years?

Gokulanathan K

As per the provisions of Section 80C of the Income-tax Act, 1961 (‘Act’), the deduction is available in respect of any sum paid or deposited (as specified in the said section) during the concerned Financial Year (‘FY’), subject to a maximum eligible deduction of ₹150,000. Accordingly, for the amount contributed in May 2020, the deduction available to be claimed in your father’s hands would be for FY 2020-21, which shall be restricted to ₹150,000 (i.e. only for the year in which the amount is deposited in an account under Senior Citizen Saving Scheme). The amount invested during FY 2020-21 would not be eligible for deductions in future years.

The writer is a practising chartered accountant

Send your queries to taxtalk@thehindu.co.in

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Directive on unclaimed maturity proceeds of TDs

Banking & Finance

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The Reserve Bank of India (RBI) on Friday said unclaimed maturity proceeds of term deposits (TDs) with banks will attract the rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

This directive comes in the backdrop of TD rates of some of the small finance banks being higher than savings bank (SB) rate (on deposits above ₹1 lakh) in the less than one-year and above five years maturity buckets.

Hitherto, if a term deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract interest rate as applicable to savings deposits.

Also read: At G-Sec auctions, bid at yields closer to the prevailing secondary market level: RBI to PDs

But after reviewing its “instructions on interest on overdue domestic deposits”, the RBI said: “it has been decided that if a TD matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.”

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PSBs form ‘Alliance’ to provide door step banking, BFSI News, ET BFSI

Banking & Finance

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Public sector banks (PSBs) have come together to form a new company in an attempt to take banking services to the doorsteps of their customers as they battle the challenges posed by the Covid 19 pandemic.

The new company called PSB Alliance Pvt Ltd will engage banking correspondents on behalf of the 12 public sector banks under a common standard operating precedure (SoP) to provide financial and non financial services directly to customer homes.

Former State Bank of India (SBI) chief general manager and deputy CEO of Reliance Jio Payments Bank, Rajinder Mirakhur has been appointed as CEO of the new company.

“Currrently, different PSBs engage different banking correspondents (BCs) for their doorstep banking services. With this company we are hoping to provide resources which can be used by all PSBs at a low cost,” Mirakhur told ET.

Currently eleven non financial services like pick up of cheques, request for an account statement, request for income tax documents like TDS certificates, delivery of payorders etc can done through this facility. Customers can also request a digital life certificate. Cash withdrawal is the only financial service currently provided. PSB customers can request the services through the web, mobile app or phone after an OTP based verification process.

Customers will have to pay a fee of about Rs 88 per service including GST. A part of this fee will go to the vendor providing the service and rest to the bank.

“We are still finalising the model to scale up. We can either hire different BCs and use their technology and manpower or create our own application to be used pan India by all BCs servicing PSBs which will create standardisation and ensure all can plug into the system, which is more feasible,” Mirakhur said.

Two service providers, Atyati Technologies and Integra Microsystem have already been hired by PSB Alliance as service providers.

PSB Alliance has a capital base of Rs 14 crore and has emerged out of another PSB promoted company Cordex India which was formed in 2010 to study operational risk in banks. The articles of association of Cordex were changed to include door step banking services on 29 April when it received approval from the registrar of companies as PSB Alliance.

Besides public sector banks, two private sector lenders IDBI Bank and ICICI Bank were also shareholders in Cordex but will surrender their stake in favour of PSBs.

“This entity is now one promoted by PSBs but all individually hold less than 10%. Each PSB has deputy one person as employee of this company right now and we will see how much personnel we need going forward,” Mirakhur said.

Bankers said the model provides banks with various benefits besides cost savings.

“It gives us economies of scale, collective bargaining and polling of resources. But most of all it gives us a collective knowledge pool which will help us to benefit from each others experiences,” said Rajkiran Rai, MD at Union Bank of India.

Bankers are hoping that by providing some services at homes they can wean away customers from branches which will help reduce the risk of spreading infections and free staff from routine work to focus on revenue earning opportunities.



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Tax query: Does inheritance attract income tax?

Personal Finance

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My wife has received some money being the second holder in an FD with her mother (now deceased). The FD maturity amount is to be shared with all her brothers and sisters, as per the legal heir certificate (there is no will). As of now, the bank has deleted the name of the first holder on submitting the death certificate. How does she account for these amounts? Already a portion was shared but the entire TDS isn’t being shown in her name.

HH BernardAs per the provisions of Section 56(2)(x) of the Income-tax Act, 1961 (‘the Act’), a sum of money received by way of inheritance should not be considered as taxable in the hands of the recipient. Thus, money received by your wife as legal heir of her mother shall not be taxable in her hands. Her share of such receipt will be required to be considered by her as an exempt income and accordingly reported while filing her tax return for the subject year. Regarding claim of TDS, your wife will be required to claim credit of her share of proportionate TDS in her hands along with proportionate share of interest income, and the balance TDS (for siblings’ share) will be required to be passed on to respective siblings. Such bifurcation must be appropriately reported in your wife’s income-tax return form (under TDS schedule) for the financial year in which tax has been deducted.

My father-in-law (78 years) is a retired government official earning a monthly pension from Central Government. Is he eligible to invest under PMVVYor SCSS? What are the tax benefits/liabilities, if any, subject to his eligibility?

Ashim Sanyal

The primary eligibility criteria for both the schemes mentioned by you i.e. Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizen Savings Scheme (SCSS), is that the individual opening the account should be 60 years of age or more. The schemes do not have any restriction on the maximum entry age or for retired central government employees. NRIs/ HUFs are not eligible for SCSS. As your father-in-law is 78 years of age and assuming he is a resident in India (pre-requisite for SCSS), he shall be eligible to invest in both the scheme.

Both schemes do not provide any tax benefits at the time of making investments. The pension received from the scheme shall also be taxable in the recipient’s hand at applicable slab rates, as ‘Income from Other Sources’.

I have invested around ₹4 lakh in some mutual fund schemes, all being regular plans with dividend options. They have deducted tax on the dividend amounts paid during financial year 2020-2021. Will the mutual funds issue Form 16A and will the details of taxes deducted and remitted to the Government be reflected in Form 26AS of the tax department? Also, can I claim refund of the tax so deducted on filing my return of income? Please clarify.

J R Ravindranath

As per section 194K of the Income-tax Act, 1961, any person, making payment of dividend from mutual funds, shall at the time of credit of such income or at the time of making payment (exceeding ₹5,000), whichever is earlier, shall deduct tax at source (TDS) at 10 per cent. The deductor is required to file the details of such TDS in quarterly withholding tax statement (Form 26Q) and TDS certificate (in Form 16A) is required to be issued by the deductor within prescribed timelines. Details of such income and corresponding TDS shall reflect in your Form 26AS for FY 2020-21. You can file an income tax return and show your dividend income as also any other income which needs to be declared. Basis your taxable income and resultant tax payable, you can claim credit for TDS on dividend and claim a refund, if any.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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Business correspondents seek rationalisation of GST, BFSI News, ET BFSI

Personal Finance

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Business Correspondents and companies working with them have sought rationalisation of GST, regulatory changes to ensure viability of the business correspondent business model.

Anand Kumar Bajaj, Founder MD & CEO at PayNearby says, “93% of our business correspondent network has been committed to working in tier 2 and tier 3 towns, serving as the sole point of cash disbursal in locations with limited financial infrastructure. However, the commission rates for BC services are very low to make it a profitable business. Additionally, BCs, by default, come under the 27% GST and 5% TDS on cash withdrawal even after the tax act having enabling provisions. This makes it difficult for them to stay afloat.”

Bajaj added, “We hope that this Budget takes into consideration the tough working condition of the BC network and make a few regulatory changes to ensure the viability of a community that has been vital to the cause of financial inclusion in the country.”

Spice Money founder, Dilip Modi said, “The earnings of the underbanked population are hit with taxes levied on basic money transfers. The government should consider providing some GST relief on smaller transactions conducted on the BC network. A special provision on GST and TDS for the BC model will help create visibility for this business.”

Modi noted, “The government showed support for the rural areas by deploying DBT schemes with the BC networks backing them by providing withdrawal services. The government should further this support by building BC networks as it will spell growth for the vision of Digital India beyond simple internet connectivity. It will allow more financial products and services to reach the remotest parts of India and accelerate the bridging of the gap in the access to banking services in India.”

The Business Correspondent Federation of India (BCFI) has also recommended the changes on the same lines around taxation structure.

Sunil Kulkarni, CEO and Head – BCFI said, “While urban banked customers are reaping the benefits of UPI and mobile banking services, the Business Correspondents (BC) Industry – the last mile in branchless banking, is hoping that the upcoming budget will implement the recommendation of RBI constituted “Report of High-Level Committee on Deepening of Digital Payments-May 2019” headed by Nandan Nilekani for under-banked urban/rural population by making BC originated and terminated transactions of IMPS and AEPS exempted from GST, which is currently levied at an effective rate of 27% on these customers.”

Kulkarni added, “Considering the business correspondent’s fraternity serves the lower bracket of the income pyramid, the tax bracket is very high. Additionally, for better penetration of financial services to the masses, BC’s should be permitted to offer products and services of more than one or two banks. The industry has already witnessed the critical role BC’s played during the pandemic lockdown by helping deliver banking and financial services to the last mile. We hope our concerns get highlighted and resolved with favourable policies during the budget announcement.”



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What if banks goof up on TDS on fixed deposits

Personal Finance

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I had taken a senior citizen savings scheme for ₹15 lakh with a PSU bank in 2018-19. Due to a clerical error, the PAN was not entered in their system. Accordingly they deducted TDS at 20 per cent on interest and as my PAN was not mentioned, the deduction does not reflect in Form 26 AS. Now, I cannot claim credit for the TDS. What is the solution to this problem?

Murli Krishnamurthy

Since the amount of tax deducted at source (TDS) is not reflecting in your Form 26AS, you may request your banker to file or revise their withholding tax return for the relevant quarter to which the transaction pertains. Once the details of the correct PAN are provided in the revised TDS return by the banker, the amount of TDS deducted will reflect appropriately in your Form 26AS.

The Central Board of Direct Taxes vide its memoranda issued on June 1, 2015, and March 11, 2016, had advised tax officers not to recover the amount of taxes deducted at source from taxpayers if the deductor has already withheld the taxes and failed to deposit the same to the government. The Bombay High Court in the case of Yashpal Sahni ([2007] 165 Taxman 144 (BOM)) held that the tax authorities cannot recover taxes once again from a taxpayer who has suffered deduction and the deductor has failed to deposit such taxes to the treasury.

In view of the said notification and judicial precedents, where your banker is unable to resolve your query immediately (before the due date of filing the tax return) you may claim TDS credit in your tax return.

However, due to mismatch in the credit claimed in the tax return vis-à-vis Form 26AS, your tax return might be processed with an error in claiming the TDS, and demand could be raised to that effect. A grievance petition before the ‘Centralised Processing Centre for TDS return via the e-filing portal could be filed, with supporting documents such as bank statement, statement of TDS (Form 16 A), etc.

The writer is Partner, Deloitte India.

Send your queries to taxtalk@thehindu.co.in

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