The TRACES portal of Income-tax department is preventing deductors from issuing TDS certificate unless past demands, irrespective of whether it is valid or not, are paid
The Tax Deducted at Source (TDS) reconciliation analysis and correction enabling system (TRACES) portal of the Income Tax (I-T) department is preventing deductors to obtain TDS certificate unless past demands are paid and online correction submitted. This is turning out to be a nightmare for those, who have disputed the demand or are wrongly shown as defaulters or who do not even know about the demand. In addition, it takes too much of a time to rectify the errors in tax demands from the I-T department.
"(The) Centralized Processing Centre (CPC) TDS prompts you to first close the short payment defaults before submission of request for download of TDS Certificates," a note on the TRACES portal
In a communication issued on 18 March 2015, the CPC (TDS) TEAM, says, "The Centralized Processing Centre (TDS) has observed from its records that there are Short Payment Defaults in Quarterly TDS Statements submitted by you (deductor) and therefore, downloading of Consolidated Files and TDS Certificates are currently restricted for your tax deduction and collection account number (TAN)."
The communication says CPC (TDS) has initiated a special drive for closure of Short Payment Defaults due to Unmatched or Insufficient Challans in the TDS Statements. "Since the due date for filing of TDS Statements for fourth quarter of 2014-15 and distribution of TDS Certificates subsequently is approaching fast, you are suggested to close the above defaults without any further loss of time," it says.
Short payment defaults in the TDS Statements may appear due to unmatched challans and insufficient challans. The portal itself admits that at times, data entry mistakes are committed, while reporting tax payments in the respective TDS statements. In addition, incorrect quoting of TAN, incorrect assessment year in ITNS 281 while depositing TDS may happen. Further, multiple on-line tax accounting system (OLTAS) challans may have been reported in the TDS statement incorrectly, with information pertaining to only one challan, and mapped with the referenced deductee rows.
As per issue of insufficient challans is concerned adequate balance may be available in OLTAS challans, however, already consumed challans may have been incorrectly used in the TDS Statement. The deductor may have tried to consume more than the available challan balance for reporting TDS deducted in the statements. "Though CPC (TDS) makes best efforts to match challans, however, they may remain unmatched leading to 'Short Payment' Defaults," the Communication says.
So, how can the deductor rectify the tax demand? You have to first download justification report from the TRACES portal to view your latest outstanding demand. In case there is no available challan, you are required to first deposit the due tax in the bank and then the same challan will be available for tagging in CPC (TDS) system after around three-four days of deposit. The Online Correction facility of TRACES can also be used for closure of the short payment default, which can be availed without digital signature.
The CPC (TDS) communication recommends to us to close the default by tagging unconsumed challans, if available in its system, through Online Correction. The deductor can access the details of defaults, if any, only during online correction process. Once the challan is suitable tagged and online correction submitted to CPC (TDS), then it would be processed and the rectification in short payment defaults may take place. However, there is no time specified for this process.