E-Filing of Tax Returns gets delayed due to Traces Systems

TRACES stands for TDS Reconciliation Analysis and Correction Enabling System and has been set up by TDS Centralized Processing Cell of the income-tax department.

TRACES will integrate the following components,

• Tax information Network
• Automated TDS Challan Matching
• TDS Defaults Processing
• IVR/ Call Centre
• Web Portal

In most countries the withholding tax provisions are applicable for salaries or for foreign payments only. If we take States as an example, withholding taxes are applicable on wages, payment to foreign persons, dividends and interest. Taking UK as another example, 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.

While professionals are busy discussing with improvising and re-defining norms related to tax at source in India, and the different ways in which TDS provisions can be improved, we take time out of the extremely hard pressed tax season and discuss about the new website launched by the Income Tax Department called TRACES (www.tdscpc.gov.in). It took years for the system to be stabilized 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 very outset, the new system is inherent of several limitations, out of which the following problems are extremely critical and needs to be closely taken into due consideration:

1) Non-Availability 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.

2) 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”.

3) 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.

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.

 Suggested Improvements

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. While the filing process of Income Tax Returns is simple, the process for TDS returns is long and ambiguous. There should be an option for registered assessees to simply upload their TDS returns under Digital Signature.

The Income Tax Department has introduced new a method to issue Form 16/ Salary Certificate to the employees. This system mandates that Part A of Form 16, which contains total income and tax deduction details for a particular financial year needs to be generated using the TRACES portal and Part B ( personal details of the employee) needs to be prepared by the employers.  This method is a step in the right direction, since now there would be lesser chances of discrepancies in the Form 16 vis-à-vis Form 16AS (Tax Deduction) details on the portal of IT Department. However, since this is the first year of its implementation, there ought to be some operational issues.

Mind you there is a penalty of Rs. 100 per day prescribed on the company for delayed issuance of Form 16 to the employees. Many companies would have delayed the issuance of Form 16, mainly due to this new system, thus the government may look to be lesser stringent on the penalty front.

At Taxmantra.com, we provide one-to-one Personalized Income Tax return Filing Services to help tax payers in addressing their tax issues and also in filing of their income tax returns. You can look to visit our Online ITR Filing Page.

You can also call us at +918820820811 & Press (1) between 9:30 am to 9:30 pm from Monday to Saturday to avail this service or send an email at – “info@taxmantra.com”