How to File Nil Return in TDS?

What is NIL TDS Return?

A return that specifically features solely Zero/NIL Deductions in its deduction details, with no mention of any challan details except for an indication of a NIL Challan, is referred to as a NIL Return. It is essential to note that the value in the NIL return should be greater than zero, which is the total amount paid/credited. NSDL does not accept a zero payment amount. Therefore, it is mandatory for a deductor to file an NIL return in the scenario where some payments have been made, but no TDS/TCS has been deducted or collected on the payment amount. It is crucial to understand that a return lacking both Deduction Details and Challan details does not qualify as an NIL return.

What is the position for an assessee who has not made any TDS payment at all in a quarter?

If no payments have been made under a specific form, it is not mandatory for the deductor to file eTDS returns for that form unless specifically instructed by the IT Department or NSDL. The requirement to submit quarterly TDS Returns only arises if tax has been deducted at the source. According to the legal framework, there exists no obligation to file a Quarterly TDS Return/Statement in cases where no tax has been deducted at the source. NSDL further maintains that it is not obligatory to file an NIL return if the deductor has not deducted any tax at the source or if there has been no transaction whatsoever during a specific period.

When Assessee is required to file an NIL TDS return?

An assessee is required to file a NIL TDS return only when the payment is subject to TDS, but no tax has been deducted at the source because the deductee has shown the assessing officer a certificate stating that the tax rate is NIL. This process helps to claim a tax credit by the deductee. However, if there are no payments done under that particular form, it is not mandatory for the deductor to file e-TDS returns for that form unless intimated by IT Department/NSDL. The obligation to file quarterly TDS Return arises only if tax has been deducted at source. Filing of TDS return in case of NIL deduction is not compulsory.

What about Challan and the deduction Link for Zero Deduction?

In cases where there are records indicating zero deduction amounts, it is necessary to display these deduction records in the deductions entry screen, accompanied by an appropriate 'No Deduction' remark. For example, this might involve mentioning a transporter with a valid PAN or a no-deduction certification under section 197. Additionally, it is advisable to associate these deductions with a valid challan. This implies that the deductor must make a tax payment and link the records of zero deductions to that particular challan. Doing so will aid in preventing any discrepancies or default notices from the Income Tax Department.

How to prepare Nil TDS challan?

A Nil TDS Challan is a challan with zero amount that is used to file a Nil TDS Return, which means there are no deductions in the deduction details and no challans (except for the Nil Challan Indication). A Nil TDS Return is required when the deductor has not deducted any TDS in a quarter. Here are some steps to create a Nil TDS Challan:

• You need to use a TDS payment software, such as ClearTDS1 or TaxCloud2, to create a Nil TDS Challan. You can log in to the software and add a new deductor or work on an existing one.
• You need to go to the Challans section and enter the last date of the quarter as the challan date. You also need to select the Nil Challan field and do not enter any TDS amount, challan number, or BSR code.
• You need to go to the TDS Returns section and create a new return or work on an existing one. You must select the Challans option and then click Select Challan under More Options next to Save Challans. You need to select the Nil Challan and submit it.
• It is essential to be aware that the department no longer accepts nil challans without any specified tax deductions. You must provide certain tax deductions linked to the challan.

How to File NIL TDS Return

The step-by-step process for filing a Nil TDS Return is outlined below:

• Access TRACES portal and log in using your Credentials ID.
• Navigate to the "Statement/Payments" tab after logging in and locate the "Declaration for Non-Filing of TDS statement" page.
• Enter the required details, including the Financial Year, Quarter, Form Type, and the reason for non-filing of the return.
• Add the statement details by selecting the "Add Statement Details" option.
• Proceed by selecting the appropriate options.
• Follow the department's instructions and check the declaration box.
• Review the provided information and complete the transaction.
• A confirmation email will be sent to the deductor's registered email address.