On every sale of Goods and Services above a certain limit, TDS is deducted by the Customers. Companies need to reconcile TDS periodically by extracting transaction data from Accounting Software & 26AS form from the government portal to ensure that the client has given proper credit, and avoids penalties and audit risk.
The TDS and TCS that are eligible for the credit are reflected in the statement while reconciling with the ledgers. The amount stated in the statement is like advance tax paid by the deductee and eligible for credit. Hence it is of utmost importance that the amount matches the TDS/TCS receivable ledgers of the deductee.
While this process is crucial, it is done manually by the majority of organizations today. A survey found that Tax managers spend at least 8 hours a week on average on manual data tasks. In fact, 25 percent reported spending over 20 hours a week on manual data tasks.
In another survey of over 280 companies, 62 percent of respondents reported that a large part of inefficiencies could be eliminated by using automated tools. Just like the other financial functions, TDS reconciliation is faced with a similar fate. Accurate reconciliation of TDS credit reduces the tax burden and ensures no loss of TDS credit. However, due to manual intervention, faces the following challenges:
Challenges spelled out
- The possibility of manual errors in inputting amounts while filing returns can result in a mismatch.
- For deductees having a large number of customers, matching amounts is a herculean task.
- The frequent updates to 26 AS make it time-consuming to reconcile and track on excel worksheets.
- Adopting manual work involves different people and their different ways of working. This lacks standardization and discipline. Communication usually happens over email and is easy to falsify or spread misinformation.
- Proactive tracking of discussions with tax deductor/collector for corrections due to identified mismatches. Finance teams are needed to manually communicate over endless emails and calls.
- In many instances, issues can be caused due to version control of excel sheets and other documentation
- The reports might be kept in disparate places while working in a manual model.
- The booking of TDS in the books of the deductor and deductee can be in different periods. Time differences spill over from one quarter to another quarter in the form of 26AS causing further discrepancies.
Automating this process will enhance accuracy for 26 AS and significantly reduce time in processing low-value-adding activities. It also enables us to manage TDS and TCS credits as per Form 26AS and books of accounts and almost nullify leakages.
What are the benefits of automating the reconciliation process?
Running a tax department equates to having a plethora of responsibilities, especially concerning compliance and regulations like TDS. However, using reconciliation automation tools helps expedite the reconciliation process and closure while also improving compliance, enhancing accuracy, and promoting transparency.
- Firmways’ 26 AS Reconciliation Software is also one such software that makes the reconciliation process seamless for the organization.
- Maps the TAN number with the PAN number for reconciling
- It can reconcile large volumes in 60 seconds.
- With the flexibility, it offers in quarterly, half-yearly, and annual reconciliations, it highlights mismatches and classifies entries into different buckets for ease of operations.
- Efficiently manages communication with parties and generates actionable reports as and when required
Automation of the reconciliation process is truly the need of the hour for any business. With manual processes, it’s difficult to scale in response to the reconciliation when there is an increase in transactions. However, automation of the process makes the entire process effortless.
