“Traces”

What is traces?

TRACES stands for TDS Reconciliation Analysis and Correction Enabling System, which enables employers to reconcile their tax deduction with deposit details of their employees as provided by banks in the country. It is an online portal designed by the Income Tax Department of India with the support of National Securities Depository Ltd (NSDL). The system enables employers to match the details of their employees’ Tax Deduction and Collection Accounts Number (TDCAN) with details of amount monthly deposited by them in their respective accounts.

Components of traces

TRACES is composed of 3 major components which include TDS, TCS, and Air. These components are interconnected with each other and provide employers with a transparent online view of the overall tax deduction process.

Benefits of traces

TRACES provide several benefits to employers. They are able to:

• Verify TDS filingEmployers can quickly review their TDS filings and cross-check it with the details provided by their employees.
• Reconcile TDS dataEmployers can match their employee’s TDCAN with the corresponding deposit details available on TRACES, enabling them to reconcile their TDS deduction obligations accurately.
• Securely manage paymentsPayments made to employees through TRACES are secure, traceable and consistent with records kept in the system.
• Prioritize employee’s claimsThrough TRACES an employer can easily identify and prioritize employees’ tax-deductible claims.
• Access real-time dataEmployers can access real-time tax-related data by logging into their company’s portal in TRACES, thus staying updated with the latest tax updates.

FAQs

What is TRACES used for?

TRACES is used to ensure that employers don’t miss out on their obligations to deduct Tax Deduction and Collection Account Numbers (TDCAN) from their employee’s income every month. TRACES also streamlines the whole process of payment for an employee on the basis of TDCAN deposited by the employee.

Is traces mandatory for businesses?

Yes, TRACES is a mandatory submission that is required by employers for any payments made to their employees. This ensures accuracy and consistency in the tax filing process for both employers and employees.

What types of information can I find on traces?

TRACES provide employers with various tax-related information including TDS deposited and credited, adjustments made in filing and deduction certificates for employees, as well as corrections for incorrect TDCANs. It also serves as a secure portal for submitting tax-related documentation such as TDS returns.