Ahead of the looming July 31 deadline for filing Income returns, some employers are struggling to issue Form 16 certificates to staff due to processing delays and technical glitches in the Income Tax portal, as well as challenges arising from new norms related to PAN-Aadhaar linkage, according to tax practitioners.
Companies file fourth-quarter returns for taxes withheld on behalf of employees by May 31, and individual employees’ Form 16 which reflects their income and tax deductions for a year, are subsequently generated on the IT department’s TRACES portal.
“There are certain technical glitches on the TRACES portal over the last one month and as a result, it is seen that the quarterly TDS returns filed are not timely processed, which is generally processed within two days,” said chartered accountant Suresh Surana. Due to the processing delays, some deductors were not able to timely generate Form 16 and share with the employees, he said.
While this could hamper IT returns filing for affected taxpayers, a recent tax department mandate for employers to deduct tax at a higher rate if an employee’s PAN is not linked with Aadhaar by May 31, 2024, with retrospective effect, is also adding to the challenge.
Akhil Chandna, partner at Grant Thornton Bharat, also pointed to numerous recent issues with the portal due to which employers have been unable to issue Form 16 within the due date prescribed by the tax laws.
He attributed delays in the processing of returns to high request volumes, a backlog, or technical issues on the TRACES portal.
“Recently, we have noticed that the TRACES portal is taking more than 30-35 days to process returns. Further, in cases where the PANs are inoperative as they have not been linked with Aadhaar, the system is raising tax demand on the employer even in cases where salaries are below the threshold limit,” Anita Basrur, partner-direct tax at Sudit K Parekh & Co. LLP, told The Hindu.
“This is putting tremendous pressure on deductors and employers as they are unable issue the certificates in a timely manner,” she added.
“In one of the cases, it took around two weeks for the e-TDS return to get processed due to technical issues on the Portal, even after continuously following up with the tax department,” Mr. Chandna pointed out.
He also termed the inoperative PAN issue as a significant challenge for employers these days as it triggers a default in their e-TDS returns. “Overall, these issues are resulting in delays and complications for employers in fulfilling their reporting and compliance obligations related to Form 16,” Mr. Chandna noted.
Ms. Basrur said the situation is trickier if a tax deductor needs to revise the withholding tax returns filed. “The delay in processing the returns is having a cascading effect and there are unnecessary delays which could result in delay in filing return of income by individuals,” she summed up.
