TDS: DEFAULTS AND CONSEQUENCES

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.

TDS is deducted on the following types of payments:

• Salaries
• Interest payments by banks
• Commission payments
• Rent payments
• Consultation fees
• Professional fees etc

Chapter XVII-B casts several obligations on the assessee or the person responsible for payment with respect to collection and recovery of tax Deducted at Source

Consequences of defaults related to Tax Deduction at Source

The non compliance of the provisions of the Chapter XVII-B makes the assessee or the person responsible to the following consequences which include penal interest, late fee, penalty and prosecution:

DEFAULT	CONSEQUENCE	SECTION	QUANTUM
Failure to deduct tax/deduct at rates specified	Demand	201(1)	Amount of tax deductible
	Interest	201(1A)	@1% pm from the date on which tax was deductible to the date of actual deduction
	Penalty	271C	Equal to amount of tax
Failure to deposit tax	Demand	201(1)	Amount of tax not deposited
	Interest	201(1A)	@1.5% pm from the date of deduction to the day of TDS payment
	Penalty	276B	Rigorous imprisonment from 3 months to  seven years plus fine
Failure/delay in furnishing TDS Statements	Late fee	234E	Rs. 200/- for every day of delay but not exceeding tax deductible
	Penalty	271H	Between Rs. 10,000 to Rs. 1,00,000
	Penalty	272A(2)(k)	Rs. 100/- for every day of delay but not exceeding tax deductible
Failure to deliver declaration in form 15G/15H to CIT	Penalty	272A(2)(f)	Rs. 100/- for every day of delay but not exceeding tax deductible
Failure to issue TDS Certificates	Penalty	272A(2)(g)	Rs. 100/- for every day of delay but not exceeding tax deductible
Failure to apply/quote TAN	Penalty	272BB	Rs. 10,000

 Failure to mention the PAN of the deductee in TDS Statements/CertificatesPenalty272B

Rs. 10,000

 

 

 

 

Note: Apart from the above, the failure to deduct /pay also causes:-
(a) Disallowance of expenditure u/s 40(a)(ia)

By

Maitri Badani

(Article Assistant)