Query 1]

 I have few questions regarding  TDS as under:

  1. What to do in case TDS, if the person/firm deducting tax is not depositing TDS with I.T. Authority? What are the penal consequences on the deductor who are not depositing or not issuing the TDS certificate?
  2. How the ITR will be filed without TDS certificates being issued by person/firm to individual person/firm? 
  3. I am doing business of wholesale and maximum turnover is less than one crore. Shall I have to deduct TDS? For person with turnover below one crore, will it be ok if TDS not done? [Hiren]


First Part of the Query:

  1. The person deducting the tax at source is duty bound to:
  1. Deposit the amount of Tax Deducted at Source (TDS) within prescribed time in the Government Treasury.
  2. Timely file the Quarterly TDS return in respect of TDS
  3. Issue the TDS Certificate to the Deductee within a prescribed time.
  4. There is a penalty on deductor for non compliance with each & every obligation, as under:
    a. If a person fails to deduct the whole or any part of the tax at source, or after deducting fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to pay
    i] Simple interest [u/s 201(1A)] @ 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and @ 1.50% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Such interest is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.
    ii] Such person who has failed to pay the amount of TDS may further be liable to pay the penalty of an amount equivalent to TDS u/s 271C.
    iii] The most terrible part of the penalty is u/s 276B wherein person deducting but not paying the tax shall be shall be punishable with rigorous imprisonment for a term which shall be between 3 months to 7 years, along with fine.b] For non filing of TDS Return within prescribed time, there is a penalty provision of Rs. 100/- per day, subject to maximum of TDS amount [u/s 272A(2)(k)]. Further, a mandatory late filing fee of Rs. 200/- per day, subject to maximum of TDS amount, is also leviable u/s 234E. Besides, a penalty of Rs. 10,000/- to Rs. 1,00,000/- is there for non filing or inaccurate filing of TDS return [u/s 271H].

c] For non issuance of TDS Certificate within a prescribed time, penalty is imposable u/s 272A (2) (g) @ Rs. 100/- per day, subject to maximum of TDS amount, during which the failure continues. However, the amount of penalty cannot exceed the amount of tax deductible/deducted.


Second Part of the Query:

The advantage of the TDS to the Government in widening tax base & raising revenue cannot be ignored. However, despite so many TDS awareness programme & seminars, still there are lot many deductor who are not depositing the TDS amount in the Government treasury. Without Quarterly TDS Return being file by the Deductor, TDS would not get reflecte in the 26AS statement of the deductee and in normal course tax credit could not be given to the deductee. Deductee are in a fix when the deductor deducts the tax but doesn’t either deposit the tax or after deposits either doesn’t file TDS return or file it erroneously without correctly mentioning the details of deductee. This is the most common grievance that is face by many deductees across the country. The problem arises not only at the time of claiming tax credit but also arises at the time of e-filing of return. In such cases, the deductee should file the return incorporating such TDS amount also. For this, deductee has to compulsorily mention the Tax Deduction Account Number (TAN) of the deductee without which it would not be possible to file the return electronically. Further, Deductee should follow the following approach in such cases:

  1. Write a letter to the Deductor incorporating:
    a] The details of payments done and the tax deducted thereon
    b] Provision of Section 203 read with rule 31 which requires the deductor to issue TDS certificate within 15 days from the end of the quarter in which TDS is do.
  2. Keep the proof of letter issued to the Deductor
  • If despite this, the certificate is not issue within reasonable time, write a letter to Joint Commissioner or Addl. CIT of TDS wing who has jurisdiction over the Deductor     mentioning the detail facts elaborate above.

Readers may note that TDS wing of Income Tax department is working pro-actively and very rigorously initiating the penal proceeding against the defaulters who are illegally withholding the amount of TDS thereby causing hassles to the deductee.


Third Part of the Query:

Companies, Firms, LLP are require to deduct tax on the specific payment irrespective of their turnover. However, this is not so with the individual assessee / proprietary firm. If turnover in the preceding financial year exceeds the limit set for tax audit (i.e., Rs. 1 Cr for the person engaged in business & Rs. 25 Lacs for the person engage in the Profession), then even Individuals/ HUF would also be require to comply with the TDS provision in general. For example, if turnover of an Individual businessman Mr. X in the FY 2013-14 was Rs. 90 Lacs, no TDS compliance would be require in the FY 2014-15. But if the turnover exceeds Rs. 1 Cr in the FY 2014-15, he would be require to comply with the TDS provision in the FY 2015-16. No TDS compliance would have be require in the FY 2014-15 i.e., the year of turnover exceeding Rs. 1 Cr.