GOVERNMENT OF INDIA

MINISTRY OF FINANCE
COMMISSIONER OF INCOME TAX (TDS)
7/119, RADIANCE TOWN, SWAROOP NAGAR, KANPUR.
Phone No.-0512-2551593, Fax No.-0512-2540409
F.NO.CIT (TDS)/ KNP/Misc./2019-20/ Dated:

To,

The Principal Secretary,

Panchayati Raj and Rural Development,
Government of Uttar Pradesh

Sir,

Sub: Non-compliance of TDS provisions statutorily mandated under the

Income Tax Act, 1961 by Panchayati Raj Institutions in Uttar Pradesh -
Regarding -

Kindly refer to the subject mentioned above.

2. In this connection, your kind attention is invited to the provisions of sec 192 C of the IT
Act which require that TDS at the prescribed rates is to be deducted by the person
making payments in the nature of ‘work contract’. In the case of Panchayati Raj
Institutions, the payments are being disbursed through the bank accounts of respective
Gram Panchayats.

3. In the TDS verification surveys conducted on some of Gram Panchayats by the officers of
TDS Wing, it was revealed that the Gram Panchayats are either not deducting TDS on
the contract payments or if deducting, the amount deducted is not being deposited to
the account of Income Tax department through ITNS challan no 281.

4. In view of the aforementioned facts and circumstances, the officers of TDS Wing
conducted outreach programs with the DPROs and Panchayat Secretaries to sensitize
the Punchayati Raj Functionaries and understand the practical difficulties faced by them.
The issues regarding non-compliance of TDS provisions emanating from the interaction
with field functionaries are discussed as under:

(a) That Gram Panchayats are now mandatorily required make all payments via PFMS
through interface software PRIYASOFT. No payments can now be made through
cheques by Gram Panchayats.
 (b) It was noticed that the software PRIYASOFT lacks functionality for TDS payments by
the deductors. It was conveyed by Panchayati deductors that the TDS deducted amount
is lying in the respective bank accounts of Gram Panchayats in the absence of
PRIYASOFT functionality for payment tax of deducted at source into the Income Tax
Department account.

(c) Lack of awareness among the deductors regarding the functionality of auto debit of TDS
amount from the respective bank account of Gram Panchayat through the Income Tax
Department challan ITNS 281. The deductor is required to furnish the prescribed challan
ITNS 281 mentioning its TAN number, amount of TDS and respective bank account
number of Gram Panchayat in the respective branch of bank. The amount gets
automatically credited to the government account with a unique CIN Number provided
by the bank to the deductor. This CIN number is to be utilized for narration in the
PRIYASOFT for TDS payment and mentioned in the TDS return to be filed quarterly.

(d) A Standard Operating Procedure (SOP) has been compiled by this office keeping in view
the difficulties highlighted by the field functionaries of Panchayati Raj. The SOP provided
step by step guidance for filing up of ITNS challan no. 281 for depositing TDS amount
through electronic clearance as required in the PFMS.

5. It is worthwhile to mention that default in non-deduction of TDS and subsequent non

deposit into the government account provides for tax and interest @ 1.5% per month of
default as per provisions of sec 201(1) and 201(1A) of IT Act. Further, the deductor is
liable for penalty separately under sec 271C of IT Act.

In the light of discussion in the preceding paragraphs, you are requested to kindly circulate the
SOP mentioned in para 4 (d) to the various field functionaries of the Panchayati Raj Department
and ensure its immediate compliance so as to comply with the TDS provisions of IT Act and to
minimize the default in tax, interest and penalty on part of respective deductors.

Furthermore, correspondence with the vendor of PRIYASOFT may urgently be made to make
available the functionality for accounting of TDS provisions. The matter may be accorded
utmost priority keeping in view the severity of issues and quantum of revenue involved.

Yours faithfully,
Encls: as above.

[Manish Mishra]
Commissioner of Income-tax (TDS),
Kanpur.
 Standard Operating Procedure for payment of TDS amount

Step 1 : Obtain TAN Number for the Gram Panchayat

Step 2 : Get the details of bank account number of Gram Panchayat along with details of
authorized signatories.

Step 3 : Deduct TDS at the prescribed rates while making payments to contractors through
PFMS. The deducted amount of TDS is now lying in the bank account of Gram Panchayat.

Step 4 : Download challan ITNS 281 from Income Tax Department website prescribed for
payment of TDS amount to Income Tax Department.

Step 5 : Filling details in the challan 281

(a) Fill particulars like TAN Number and name of deductor.

(b) Mention correct Assessment Year. Kindly note it is different from Financial year. For FY
2019-20 assessment year would be 2020-21.

(c ) Fill the amount of Tax

(d) Select the option of “debit to Account” and mention the Gram Panchayat Account Number
while selecting modes of payment. Other modes like cash, cheque are to be crossed.

(e) The challan 281 is to be submitted with letter of authorization issued by competent
authority stating that the account is linked to PFMS specifying authorized signatories to file
challan 281 for TDS payment.

Step 6 : The duly filled challan ITNS 281 along with authorization is to be presented to the
respective branch of bank by the Panchayat Secretaries.

Step 7 : The bank shall issue receipt with CIN Number, BSR Code and date of payment.

Step 8: The necessary details may be entered under the tab “Bank Charges” of PRIYASOFT
providing complete narration of CIN Number and other TDS challan details, till the time
necessary functionalities are integrated into software. This will ensure TDS compliance and
would save deductors from taxes, interest and penalty on account of default in TDS
provisions.

A sample challan ITNS 281 has been annexed to the SOP.