Tax Deducted at Source is the centrepiece of tax compliance in India. However, even an owner who is scrupulous about operating their business, whether it is a startup or a large, established company, sometimes makes TDS mistakes that are costly and can affect cash operations, damage vendor relationships, or trigger penalties or audits.
So if you’re in Mumbai and want to avoid all these, you must learn from the best top CA firms in Mumbai and top chartered accountant firms in Mumbai. This would also mean the top CA firms that specialise in TDS issues.
Common TDS Mistakes Business Owners Make.
Some of the common TDS mistakes which business owners make are given below:-
1. Wrong TANs.
The most common blunders typically involve the incorrect use of the Tax Deduction and Collection Account Number when filing a TDS return.
A very minor mistake, such as using a TAN of a branch rather than that of the principal corporate TAN, can result in severe consequences, including mismatched records, delays in crediting TDS to deductees, and ultimately errors in your filings.
The outcome is that returns would be delayed, required to undergo rounds of correction, and subject to penalties.
How to Fix: Immediately after you discover the mistake, file a revised TDS return with the correct TAN to inform the deductees of the modification, thereby preventing confusion among all your stakeholders.
2. Incorrect Challan Details.
TDS payments rely solely on the correct challan entries, including the assessment year, challan type, and payment code. Provide incorrect details, and your payment may not be credited for that period, which could result in you having to pay for the same item again or undergo a lengthy refund process.
How to Fix: Submit a correction request through the TDS CPC portal. If you have made the excess payment, apply for a refund and keep all documents ready for verification.
3. Wrong Section Codes.
Different from one form of payment to another, the TDS sections apply. For instance, if a contractor is involved, he is liable under Section 194c; for professionals, 194J; and so on.
Incorrect and improper applications of these codes can result in penalties, audits, and, in some cases, the re-filing of returns.
How to Fix: Revise your TDS return with the appropriate section code, and then be prepared to carry the burden of any interest or penalty payable. As a golden rule, always check the latest provisions or consult experts from top CA firms in Mumbai to avoid such missteps in the future.
4. Wrong or No Deductions at All.
Omissions in deducting TDS, deductions at the wrong rate, or failure to deduct TDS have been frequently seen cases. For the under-deduction part, interest must be paid, and over-deduction can disrupt your vendors and complicate the refunds.
How to Fix: Pay the shortfall with interest immediately for under-dedication. Inform the deductee of over-deduction and adjust the excess amount in the subsequent cycle. Always check current TDS rates and threshold limits before any payment.
5. Late Payments
It’s a very costly mistake to delay TDS payments. The interest rate for late TDS deposit is 1.5% per month or part thereof. Late payments are significant in real terms.
How to Fix: Deposit the late amount, including interest, at the earliest possible date. Internal reminders or automated TDS compliance could help avoid future delays.
6. Ignoring TDS on Non-Resident Payments
Most enterprises conveniently ignore TDS on payments made to foreign entities or persons, especially under Section 195. This invites heavy penal repercussions and legal entanglements.
How to Fix: Always check the applicability of Section 195 while making payments to non-residents; refer to Double Taxation Avoidance Agreements (DTAA) when making payments to non-residents.
How to Avoid TDS Mistakes.
- Use automated compliance software to minimise manual errors
- Conduct regular internal audits and reviews of processes related to TDS.
- Stay informed about the latest laws and TDS rates.
- Top CA firms in Mumbai can provide valuable assistance in complex situations or high-value transactions.
Conclusion
Agreements in TDS are not mere signatures; they save businesses from financial and legal troubles. The top CA firms in Mumbai and top chartered accountancy firms in Mumbai provide access to expert advice and robust compliance systems.
Such firms include Epsilon Accounts Anusthan Fintech LLP, who typify the new-age finance expert leveraging technology with deep regulatory knowledge to help businesses thrive in a complicated tax space.
FAQs
Q: What common TDS mistakes do business owners in Mumbai avoid?
Incorrect TAN, incorrect section codes, late payments, and failure to deduct tax on non-resident payments are examples of common mistakes.
Q: How do the top CA firms in Mumbai help with TDS compliance?
They provide professional advice, file accurately, and make timely payments, thereby ensuring conformity to the latest TDS laws and rates.
