Income Tax Taxation

TDS Penalty in India

TDS Penalty

To understand the TDS Penalty and late Fee provisions we have to go through first basic provisions of the TDS E.g. Due date of TDS payment, the filing of return etc.

Duties of the person liable to deduct TDS/TCS

  • Must have TAN Number.
  • Must have TAN Number all documents pertaining to TDS/TCS.
  • Deduct TDS/TCS at the applicable
  • Pay such amount on the due date or before the due
  • Must file periodically statement i.e. TDS Return.
  • Must issue TDS/TCS certificate in respect of TDS deducted/collected.

Taxable Event of TDS

At the time of payment getting due or actual payment (whichever is earlier)

Interest on failure to deduct TDS & Late payment of TDS

 As per Section 201 of the income tax act 1961 if a person who is liable to deduct TDS  Penalty but failure to deduct TDS or after so deducted fails to pay, the whole or part of the tax credit to the government then such person shall be liable to pay simple interest as given below:-

  • Interest shall be levied @1% for every month or part of the month on the number of TDS which has not been deducted. Such interest shall be calculated from the date from which TDS Penalty should have been deducted till the date of TDS deducted.
  • Interest shall be levied @ 1.5% for every month or part of the month from the date on which such amount of TDS deducted till the date such amount remitted to the govt.
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E.g. XYZ Ltd. A paid fee of Rs. 1, 00,000/- on 23rd July to Mr. Sanjay Sharma u/s 194J for the month July.

However, the TDS on such amount could not be deducted on time hence the TDS Penalty is deducted on 23rd August and deposited to 15th sept

Ans. 1.TDS to be deducted @10% i.e. 10,000/-

  1. When the TDS to be deducted

At the time of payment getting due (23rd July 20XX, Assumption) OR

Actual payment (23rd July 20XX)

(Whichever is earlier?)

  1. TDS Deducted on 23rd August hence penalty shall be levied @1% for the month of July& August.
  2. However, the TDS Deducted on 23rd August and Deposited with Govt. at 23rd Sept. hence the interest shall be charged @1.5% for the month of August & Sept.
  3. Further, the TDS penalty under section 234E shall be also levied if return is not filed within time (i.e. 200 per day)

Also, Read: How HUF can help you in Saving Income Tax?

Due date of Filling TDS/TCS Return

Financial Year 2017-18

Quarter EndingDue date for filing of TDS return(Both  for government and other DDeductorDue date for TCS Return
30/June/201731st July 201715th July 2017
30/Sept/201731st Oct 201715th Oct 2017
31/Dec/201731st Jan 201815th Jan 2018
31/March/201815th May 201815th may 2018

Financial Year 2018-19

Quarter EndingDue date for filing of TDS return(Both  for government and other Deductor)Due date for TCS Return
30/June/201831st July 201815th July 2018
30/Sept/201831st Oct 201815th Oct 2018
31/Dec/201831st Jan 201915th Jan 2019
31/March/201915th May 201915th may 2019
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Provision for TDS Penalty or late filing of Fee

A person who fails to file TDS/TCS return on due Date liable to pay penalty u/s 234E & 271H

As per section 234E of the Income Tax Act 1961 where a person fails to file TDS/TCS return then such person shall along with return shall liable to submit the details to pay “Late Fee” of Rs.200 per day till the default continue. Such amount shall be calculated from the due date of the return.

However, the amount of late fee shall not exceed the amount of TDS.

As per section 271H of the Income Tax Act, 1961 where a person fails to file TDS/TCS Return or File incorrect TDS/TCS return shall be liable to pay following penalty:-

Minimum Rs. 10,000/-

Maximum Rs. 1, 00,000/-

The penalty under section 271H is in addition to the “Late Fee” u/s 234E

However no penalty u/s 271H can be levied if the following conditions are satisfied:-

  • The TDS/TCS amount paid to the Govt.
  • The late filing fee and interest (if any) are paid to the Govt.
  • The Return filled before the expiry of one year from due date.

Also, Read: Are you an NRI? Know the Tax Rules

Waiving off the Penalty

  • Under section 271A(4) the principal commissioner of income tax or commissioner of income tax has the power to waive off or reduce the penalty levied under the Income Tax Act.

However, the penalty under the section can only be waived off if condition u/s 273A (4) is satisfied.

  • Apart from relaxation provided under section 271A(4) there is another section in which immunity has been provided on the penalty levied under section 271H
READ  TDS Exemption Certificate

However such immunity is only available if there was reasonable cause for such failure.

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