Two calendars, not one: quarterly TDS statements and the TCS Form 27EQ

Most businesses that deduct tax also collect it at some point — on a sale of scrap, on a motor vehicle above the prescribed value, on an overseas tour programme, on a remittance abroad. Deduction and collection are separate reporting streams with separate returns and separate due dates, and the due dates do not coincide.

The error we see most often is not ignorance of the dates. It is a business that has learned the deduction calendar properly and then applies it to the collection statement, which by the time it is filed is a fortnight late.

The deduction schedule

Statements of tax deducted at source — furnished separately for salary, for resident payments other than salary, and for payments to non-residents — are due on the last day of the month following the quarter, with one exception at the end of the year.

• Quarter ended 30 June — 31 July
• Quarter ended 30 September — 31 October
• Quarter ended 31 December — 31 January
• Quarter ended 31 March — 31 May, not 30 April

The collection schedule

The statement of tax collected at source, Form 27EQ, runs on the fifteenth.

• Quarter ended 30 June — 15 July
• Quarter ended 30 September — 15 October
• Quarter ended 31 December — 15 January
• Quarter ended 31 March — 15 May, not 31 May

Deposit of the tax is a third thing, and it is monthly for both streams: by the seventh of the month following deduction or collection. March is treated differently, and that date should be read off the Rules for the year rather than remembered.

Why the difference costs more than it looks

A late statement is not a paperwork problem, and three consequences follow from it.

• A fee runs for every day of delay in furnishing the statement, subject to a ceiling equal to the tax reported in it. It is a fee rather than a penalty, which matters: it is not remitted on a showing of reasonable cause, and it has to be paid before the statement will go through.
• A separate penalty is exigible for failing to furnish the statement at all, and for furnishing incorrect particulars in it. That one is discretionary, and it tends to follow a pattern of default rather than a single lapse.
• Nobody gets credit until you file. Tax you have deducted does not reach the deductee's annual information statement until your statement is processed, and the deduction certificate cannot be issued before that either. Your delay lands on somebody else's return.

The third consequence is the one that generates telephone calls. A vendor who cannot see his credit will chase it, and until the statement is filed there is nothing to show him.

Where the mix-up actually happens

• A business furnishes its deduction statement on 31 July, having also collected tax that quarter, and files Form 27EQ the same day. It is sixteen days late and the fee has accrued.
• The fourth-quarter deduction statement is assumed to be due on 30 April, by analogy with the deposit date for March. It is 31 May.
• The fourth-quarter collection statement is assumed to be due on 31 May, by analogy with the deduction statement. It is 15 May.
• The collection obligation is discovered late. Scrap sales sit in a miscellaneous income ledger nobody reads until the audit, and by then several quarters of Form 27EQ are unfiled and the fee has run on each.
• There was nothing to report, so nothing was done. Where there is no reportable transaction in a quarter, the reason for non-filing should be recorded on the reporting portal, so the absence is explained rather than sitting on the record as an apparent default.

Controls that prevent it

• One calendar carrying both tracks, with a named owner against each line. Not two calendars kept by two people who assume the other one is complete.
• A monthly reconciliation of challans to the deduction and collection registers, done before the quarter closes, so that preparing the statement is a compilation rather than an investigation.
• Verification of the permanent account number when a party is onboarded, not when the statement is being filed. A missing or invalid number changes the rate and surfaces as a short-deduction default after processing.
• Reading the processing intimation after every filing. Short deduction, interest on late deposit and invalid-number defaults appear in the summary generated after processing, and a correction filed promptly costs far less than one filed after a notice.
• A standing question to the accounts team each quarter — was there a scrap sale, a vehicle sale, a remittance — rather than an assumption from last quarter.

Corrections, and what a correction cannot do

A statement once furnished can be revised, and a correction statement is the ordinary route for a wrong permanent account number, a wrong provision quoted, a challan mapped to the wrong deductee, or a figure that has changed. Corrections are routine.

What a correction cannot do is undo a delay. The fee for late furnishing attaches to the original due date, so holding a statement back in order to perfect it is almost always worse than filing it on time and correcting it afterwards.

One last distinction: the rates and thresholds at which deduction or collection is triggered change by notification and by the annual Finance Act, while the reporting dates above are stable. The dates are worth memorising. The rates are worth looking up every year.