September 20, 2018

TDS can be tedious if the in-house accounting team handles it

Two years ago, when Agrawal Textiles appointed Ayushi as a full-time accountant, they were battling with the tax compliances. Ayushi bought a sigh of relief as she started managing the taxes effectively. However, even she was scared of managing TDS and its compliances.

She would deduct the TDS erroneously on many transactions due to which Agrawal Textiles had to pay interest and penalty while filing the returns. Management of Agrawal Textiles was baffled and wanted an assured solution to the problem.

Did the problem solve?

A rigorous search of suitable tax consultants brought Agrawal Textiles to Especia Associates LLP team.

After discussing with the team, Management realised that Ayushi isn't the only person to be scared of TDS. Many accountants and tax managers consider TDS a tough nut to crack, primarily because it is highly based on personal judgement.

Various threshold limits, different tax rates

TDS comprises of multiple sections, and each of them has distinct threshold limits and several tax rates. It is painful for an accountant or in-house accounting team to remember every threshold limit and tax rate at the time of making a payment.

Tangling clauses among the sections

If you are paying to a contractor, you have to deduct TDS under section 194C at the rate of 1% or 2%. If you are paying to a professional, you have to deduct TDS under section 194J at 10%.
Since a contractual agreement binds both the contractor and the professional; the accounting team may get confused about the section and TDS rate.
Likewise, it is a daunting task to identify the difference between commission and brokerage and whether it can be considered a professional service.

GST on TDS or TDS on GST - Too confusing

At the time of making a payment, an accountant can get troublesome about the GST amount charged in the invoice. For instance, Agrawal Textiles hired XYZ Ltd for auditing the books. At the end of the audit, XYZ Ltd sent an invoice of Rs. 1,18,000 (Rs. 1,00,000 fees + 18% GST). How should Agrawal Textiles deduct TDS? Should they deduct TDS on Rs 1,00,000 or 1,18,000?

Interest and penalties can make a dent in the financial budget

If the payer delays in deducting the TDS, he has to pay interest at the rate of 1% for every month or a part of the month. If he deducts TDS correctly but fails to deposit the same to the government, he has to pay interest at the rate of 1.5% for every month or a part of the month.

Hence, if the accounting team deducts lesser tax erroneously, the company has to pay interest at 2.5% (1% late deduction + 1.5% delay in deposition) on the TDS amount. Not only this, if a person deducts TDS but doesn't pay it to the government, he can be punished with severe punishment from three months to seven years.

Don't worry - Especia Team rescues you!

Our team handles all the TDS compliances on your behalf. Right from making a payment to any vendor till issuing them the TDS certificate, we take care of all the due requirements and provisions so that you can do what you do best - Growing the business and earning more revenue.

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