It is Mandatory to file NIL TDS Return(s) with effect from 1st April 2011

1.

As per Sub-Section 6 of Section 194C of Income Tax Act, 1961, TDS is not required to be
deducted on payments made to Transporter(S) if Permanent Account Number (PAN) is
provided by the transporter to the deductor.

2.

Further as per Section 197 of Income Tax Act, 1961, the Assessing Officer can issue a NIL
(rate) deduction certificate(s) to parties under specified section(s) on submission of
application in Form 13 with prescribed details. If such parties submit the "NIL" (rate)
deduction certificate to deductor, the deductor is not required to deduct TDS from such
parties.

3.

Further if the amount paid by the deductor to the party(ies) is less than the threshold
(ceiling) amount referred to in respective section(s), then there is no requirement to deduct
tax (TDS) by the deductor from such party(ies).
(For example : Section 194C stipulates a threshold limit of single payment of Rs.30,000/and aggregate payment of Rs.75,000/- during a financial year. In respect of Section 194J
the threshold limit is Rs.30,000/-)

In all the above cases tax deduction (TDS) is NIL.

Pursuant to Sub-section 3 of Section 200 of Income Tax Act, 1961, statement of deduction of tax
(TDS return) is required to be filed where tax (TDS) has been deducted. It means that if no tax
(TDS) is deducted, then no need to file the return.
This situation has been altered with effect from 1st April 2011. The Income Tax Rules 31A has
been amended by the department to incorporate first two type of transactions (as specified
above) in the quarterly returns. This is with effect from 1st April 2011.
Sub-clause (v) and (vi) of Clause 4 of amended Rule 31A is provided below for ready
reference
(v)

furnish particulars of amount paid or credited on which tax was not deducted in view of the
issue of certificate of no deduction of tax under section 197 by the Assessing Officer of the
payee;

(vi)

furnish particulars of amount paid or credited on which tax was not deducted in view of the
compliance of provisions of sub-section (6) of section 194C by the payee.

In view of the above amendment we have to compulsorily report the following two type of
transactions in the quarterly tds return(s) (Form 26Q), which is effective from 1st April 2011.
1.

Transactions with Transporters where no tax (TDS) has been deducted in pursuance of
sub-section 6 of Section 194C of the Income Tax Act, 1961.

2.

Transactions with parties where no tax (TDS) has been deducted due to submission of
NIL (rate) deduction certificate by the party / deductee to the deductor.
(Note : This certificate shall be issued under Sec 197 by Assessing Officer of the Party /
Deductee and to be submitted to the deductor for non-deduction of tax)

NOTE : It shall be noted that the Act or Rules has not been amended to incorporate or report in
the quarterly tds returns, transactions with parties who are covered under Point No.3
(refer above) from whom no tax has been deducted which is due to ceiling / threshold
limits.
Prepared by R. Muralidharan
Due care is taken in preparing this note. As a matter of caution readers are requested to refer the Act / Rules

The following type of transactions shall come under the purview of reporting
a.

Transaction with a Transporter for an amount of Rs.40,000/- (single bill payment) will come
under the purview of Section 194C. If the transporter provides a valid PAN then there is no
requirement to deduct tax at source as the same is exempted under sub-section 6 of
Section 194C. However this transaction has to be reported to NSDL (E-TDS return
administrator) in the quarterly ETDS returns.

b.

Transaction(s) with a Transporter wherein the aggregate payment of Rs.75,000/- is crossed

or likely to cross during the financial year has to be reported to NSDL (E-TDS return
administrator) in the quarterly ETDS returns.

c.

Transaction(s) with parties who submits Nil deduction certificate issued by his / their AO
has to be reported to NSDL (E-TDS return administrator) in the quarterly ETDS
returns.

How to report such transactions in the quarterly E-TDS Returns

The deductor has to create ZERO VALUE CHALLAN in their e-tds return and have to disclose the
deductee details in the annexure against that zero value challan.
For all the three type transactions mentioned above, NSDL has provided TAGS to be used by
the deductor in their etds quarterly return.
To disclose NIL rate Transporter transactions in e-tds returns the deductor has to flag down the
TAG T in Column No.428 of the Annexure to the Return in Form 26Q (Column No.428 is a
drop down menu).
To disclose NIL rate transactions with parties who had submitted Nil deduction certificates from
the AO, the deductor has to flag down the TAG B in Column No.428 of the Annexure to the
Return in Form 26Q (Column No.428 is a drop down menu).
NSDL has also provided a Tag "Y" to disclose / incorporate entries of Nil deduction where
amount is less than threshold limits.

How to create Nil Value Challan is given below

Likely question you may ask is whether NIL e-tds statement is to be filed mandatorily. The answer
is no. It is not mandatory to file Nil E-tds statements. However subsequent to amendment to Rule
31A, we are required to report non deduction transporter transactions in E-Tds statement.
If we have remitted TDS related to section 194C with a bank, then it is easy to enter such details
in our quarterly returns. However if no challan is available then we have to add a nil value challan
in our etds return u/s 194C for purely reporting the transactions with transporters where no tax
has been deducted. Similarly for reporting transactions where no tax has been deducted pursuant
to a Nil deduction certificate, we should create a NIL value challan for each Section separately.
Details for creating NIL value challan is provided in next page.

Prepared by R. Muralidharan
Due care is taken in preparing this note. As a matter of caution readers are requested to refer the Act / Rules

Return Preparation Utility (RPU) can be used to prepare a return without a challan and / or
deductee. If there is no challan i.e. when no tax has been deposited, then challan sheet should be
filled as below
Field Value
Serial No. (Column no. 401)
Section Code(Section Relevant to the Nature of Payment)
Amount Fields i.e. TDS,Surcharge,Education Cess,Interest and Others
(Column no. 403 to 407)
Cheque / DD number (Column no 409)
Date on which tax deposited (Column no. 411) last day of respective
quarter e.g. for quarter 4 of 2011
Transfer Voucher / Challan serial No. (Column no. 412)
Whether TDS Deposited by Book Entry ?(Yes)/(No) (Column no.413)
Interest
Others

Value
1
From Drop Down
Menu
0.00 (Zero)
Blank
31/03/2011
Blank
Blank
0.00 (Zero)
0.00 (Zero)

Prepared by R. Muralidharan
Due care is taken in preparing this note. As a matter of caution readers are requested to refer the Act / Rules