A Unique Tax Compliance Dilemma: When the Law Does Not Demand Tax, but the System Blocks Compliance

 In recent times, an unusual but significant problem has emerged that exposes the gap between legislative intent and technological execution within our tax compliance ecosystem. It concerns the procedural hurdles faced by tenants attempting to comply with TDS (Tax Deducted at Source) obligations on rent payments, particularly involving Form 26QC under the TRACES portal.

The issue starts with the requirement to obtain a TAN (Tax Deduction and Collection Account Number) for deducting TDS on rent under section 194-IB of the Income-tax Act, 1961. Though obtaining a TAN is a straightforward online process that takes 2-4 working days, complications arise immediately after this step.

Even when a tenant successfully obtains a TAN and logs into the TRACES portal as a 'deductor,' they face a second layer of technical roadblocks. To initiate Form 26A—essential for the correction and certification process concerning short deduction or non-deduction—the portal mandates selecting the type of form being filed: 26QB for TDS on property purchase, 26QC for TDS on rent, or 26QD for TDS on contractual payments.

Here lies the peculiar problem—the portal currently does not have Form 26QC operational within the TRACES interface for such cases. This prevents tenants, despite obtaining a TAN and complying with procedural steps, from proceeding with the required Form 26A initiation. Consequently, genuine taxpayers, who are otherwise willing and attempting to comply, are trapped in a situation where the system does not allow them to fulfill their obligations.

An additional concern is that the TRACES portal does not permit login using only PAN credentials for initiating Form 26A under these specific categories. This reinforces dependence on the TAN-based system, which is ineffective if corresponding forms like 26QC are unavailable.

The recommended solution is clear—TRACES should enable login using PAN details and allow the initiation of Form 26A for Forms 26QB, 26QC, and 26QD. By doing so, taxpayers can assign certification responsibility to a Chartered Accountant through the e-filing portal, who can then confirm that the recipient has discharged the due tax liability. Once certified, the tenant can submit the CA-certified Form 26A, ensuring seamless compliance.

This is a classic example of how a misalignment between legal provisions and technological platforms inadvertently penalizes genuine taxpayers. While the law does not intend to create hardship, systemic inefficiencies result in unnecessary stress and non-compliance risks for ordinary citizens.

It is imperative for authorities to address such practical gaps swiftly. After all, a smooth, taxpayer-friendly interface is essential to promote voluntary compliance and uphold the trust in our taxation system.