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Complying with new system of tax credit
June, 22nd 2009

A new system of tax credit which was introduced from April 1, 2009, has been deferred till July 1, 2009. It is explained in Board Circular No. 2 of 2009 dated May 21, 2009, that tax deduction work is now outsourced to NSDL. The Income-tax Department has made it clear in the Circular that it would not give credit merely on the claim of the assessee or any evidence, including tax deduction certificates, as long as the claim of the assessee is "unmatched" with the information of tax credit from deductors with particulars of deposit of tax deducted with Government along with deductees visible in web-site or from nearest TIN Centre.

It is admitted that there is no proper compliance even on the part of State and Central Government and banks of the TDS requirements in that they either do not file TDS return or do not deposit the amount collected or make errors in citing PAN. It is stated that the Department is unable to ensure compliance due to lack of resources.

The new system also proposes to allot Unique Transaction Number (UTN) without which tax credit cannot be passed on to the deductee's account. Will the deductors now take necessary steps to comply with the new rules and forms? As a practitioner I feel that this is going to create more difficulties for refundees. It is necessary to warn the tax administration that it has made compliance more difficult both for deductors and the Income-tax Department without any steps for expediting refunds for deductees.

The new scheme referred by the reader to be effective from July 1, 2009, requires compliance on the part of the deductors under substituted Rule 30 and 37CA of the Income-tax Rules, 1962, and the new Forms 16, 16A and 27B.

Deductors are to remit the tax deducted electronically along with Form No. 17 simultaneously furnishing to the Taxpayer Information Network (TIN) system maintained by NSDL with basic information relating to PAN, name of the deductee and the amount. On such transmission, every record will be assigned with a UTN with NSDL creating a facility to e-mail the UTN file to the deductor and also facilitate the deductee to view the tax credit information . But all this means that there will be no credit for the deductee unless "matching credit" is available to the Income- tax Department.

When there had been no compliance from the deductors, when the Income-tax Department itself was undertaking the task, it is too much to hope that NSDL will be able to get all the information for matching credit, when it has no power to enforce the law.

As pointed out by the reader, it is too much to hope that the new system will help the deductees in any manner to get expeditious refund.

Remedy lies in the Income- tax Department organising itself to ensure enforcement of TDS provisions in respect of statement for tax deducted to be filed on the basis of every complaint filed by the deductees instead of driving them from pillar to post, pleading inability on its own part and requiring the refundees to fend for themselves with the deductors.

It is better that the Income- tax Department takes notice of the widespread grievance of delayed refunds and activises itself, if it cares for public relations.

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