While we are automating TDS Reconciliation (26AS Reconciliation & 34A Reconciliation) for customers – I would like to share recent experiences and instead redefine the purpose of automation. Yes, automation can help you to improve productivity and accuracy but to reach that stage – some efforts are required, and processes need to be set up at the organizational level. Let’s see where is the catch

Master Data (Mis)Management

It has been an observation that most companies don’t have accurate master data of their customers or vendors. At times, the PAN number or GSTIN maintained is incorrect, or the status as per 206AB is inaccurate. The reason for these mistakes is not intentional but more systemic. Someone had to generate an invoice to book the sales, and details were not appropriately checked while creating a customer. This mismanagement is widespread for a company having a decentralized process.

Technology can help in such situations by using connectors which can verify PAN or GSTIN at the time of customer creation—plugging the problem at the source.

This can be done as a post-mortem exercise also. TaxReco is building checks continuously to identify the lacunae in master data before TDS data gets reconciled. Using TaxReco, users can get to know the problems in their master data and rectify them in their ERP systems.

Tax Accounting

The broad objective of TDS reconciliation is to ensure that Direct Tax compliances can be done accurately and on time. To achieve this objective, the first step is to ensure proper Tax Accounting. There has been an observation that while maintaining receivables data, entries for payment received are matched, and reconciliation is done with the bank. However, TDS entries are not compared and matched on a transaction basis, due to which the total Accounts Receivable data may mismatch. To understand this better, let us take an example of INR 1,00,000 Taxable value. The customer was supposed to deduct 5000 TDS and eventually deposited 2000 TDS; the net amount paid was INR 95000, matching with bank data. After receiving such payment, it must be cross-checked whether a customer deposited 5000 against this transaction. If not, the customer needs to be followed up for short payment. This level of accuracy is only possible if companies maintain transaction-level TDS records in their TDS receivable ledger. The real purpose of TDS reconciliation is to eventually verify Accounts Receivable records based on data available in 26AS form.

Automation systems like TaxReco can be helpful in such situations by helping users to save time on repetitive non-productive tasks and making more time available to analyze data and rectify their TDS ledgers.

Automation can help you improve accuracy, which takes some time initially and requires management intervention too. Once the accuracy levels are achieved, then productivity improves significantly.