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Position for a taxpayer who hasn't made any TDS payment during a quarter. What should be done if a TDS return or statement isn't filed for a quarter and the taxpayer receives a letter or notice from NSDL or the Income Tax Department regarding the non-filing of the e-TDS return or statement? When should the assessee file a NIL TDS return, and what are the steps for creating a NIL TDS Challan and linking it with deductions? Many taxpayers often confuse Zero deduction with Nil return, leading to errors in compliance. In this guide, all these questions will be answered, and you will learn how to file a Nil Return in TDS easily. Our step-by-step guide will walk you through the process, ensuring accurate and hassle-free compliance.
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 as the Total Amount Paid/Credited. NSDL does not accept a zero amount of Payment. 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.
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.
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.
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.
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:
The step-by-step process for filing a Nil TDS Return is outlined below:
It is necessary to file a TDS NIL return when there is a payment liable to TDS, but no tax has been deducted at the source due to various reasons, such as the deductee providing a certificate of NIL TDS rate from the assessing officer.
A TDS NIL return can be filed for various types of payments that fall under the purview of TDS, but no tax has been deducted at the source.
Yes, the primary distinction lies in the fact that a TDS NIL return is filed when no tax has been deducted at the source, whereas a regular TDS return involves the deduction of tax at the source.
Errors or inaccuracies in a TDS NIL return might lead to further scrutiny and potential inquiries from the tax authorities, necessitating corrections and explanations.
