BURDEN OF TDS COMPLIANCE
In most countries the withholding tax provisions are applicable for salaries or for foreign payments only. In the US, for example, withholding taxes are applicable on wages, payment to foreign persons, dividends and interest. In the UK, it is applicable only on salaries. In India however, the provisions are applicable to routine domestic transactions also, which increases transaction cost hugely and places a big compliance burden on businesses making the payment, not to mention sucking out large amount of funds businesses could be using to invest productively. While there are several things which could be improved with the TDS system in India, currently this post is about the new website launched by the Income Tax Department called TRACES (www.tdscpc.gov.in). It took years for the system to be stabilised around the previous online system which was run by NSDL (tin.nsdl.com).
However suddenly and without any prior information, the government has moved to a new system called TRACES for the TDS related procedures. From the outset, the new system is plagued with the following problems:
1) Non-processing of returns for weeks after filing It is taking several weeks for TDS returns filed under the new system to be processed. For example, for a revised return filed in December 2012, the revised Form 16A was not available for download till last week of January 2013. Even new returns take upto 10-15 days for processing.
2) Non-Availabilty of Form 16A This is a direct consequence of the non-processing of returns as stated above. The Form 16A are not available until the return is processed. In one case, the return was delayed by a day, so in any case there was a likelihood of fine for delayed submission, but the return was not processed in the 14 days available before the due date of downloading Form 16A, which meant that even 16A would be delayed possibly leading to further fines.
3) Frequent errors on the website The website tdscpc.gov.in is frequently down or showing errors. On 30th January 2013, which was the due date for issuance of TDS certificates for non-government deductors, the site was down for maintenance the entire day. There is no information yet if the time limit for issuance of certificates will be increased and it is likely that the assessees will be hit with penalty notices for "Delay in furnishing of TDS certificates".
4) Slow generation of Form 16A by the new software We used to generate Form 16A from the earlier software, which took less than a minute. However with the new utility released, the generation of TDS certificates takes place at a speed of only 2-3 certificates per minute. It took the software half an hour to generate 79 TDS certificates for a client.
1. Automatic generation and mailing of TDS certificates The system to generate Form 16 / 16A is very tedious. Why can't the system mail the Form 16 / 16A as soon as the return is processed. We are living in an age where computers crunch data in no time, and it doesn't seem difficult to modify the system to enable automatic generation of TDS certificates.
2. Simple Online filing of TDS returns While the filing process of Income Tax Returns is simple, the process for TDS returns is long and convulated. There should be an option for registered assessees to simply upload their TDS returns under Digital Signature.