Consequences of Default in TDS Compliance
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Under section 201(1), any person who is liable to deduct tax at source fails to deduct whole or any part of such amount or after deducting fails to deposit the tax to the department, he shall be deemed to be assesse in default in respect of the tax liable to interest u/ 220 and penalty u/s 221.
Under Section 201 (1A)
i. interest @ 1% from the date tax is deductible till the date when such tax is deducted,
ii. interest @ 1.5% from the date after due date of payment of such tax deducted to the government till it is actually paid.
However, in case payer fails to deduct tax or part thereof on amount paid or credited to resident payee, the payer shall not be deemed to be assesse in default, if such payee –
1. has furnished his return of income under section 139,
2. has taken into account such sum for computing income in such return of income and paid the tax on the income declared in the return,
3. and the payer furnishes a certificate to this effect from a CA in such form as may be prescribed.
In this case, the date of deduction and payment of taxes by the payer shall be deemed to be the date on which return of income has been furnished by the resident payee and shall be considered for levying interest under section 201 (1A)(i) @1%. Also, interest under Section 201 (1A)(ii) will not apply as the date of deduction ad payment of tax is deemed to be the same, i.e Date on which ROI is furnished by Resident Assesse.
Time limit within which an assesse can be declared as Assesse in Default u/s 201:
A. In a case where TDS statement referred to in section 200 has been furnished, the time limit for passing such an order is two years from the end of the financial year in which the statement is filed.
B. In a case where TDS statement referred to in section 200 has not been filed, the time limit for passing such an order is six years from the end of the financial year in which the payment is made or credit is given.
Other Penal Provisions
A. Under new Section 234E, a fee of ₹ 200 for every day would be levied for late furnishing of TDS statement from the due date of furnishing of TDS statement to the date of furnishing of TDS statement, total amount of fee not exceeding the total amount of tax deductible and such fee has to be paid before delivering the statement. Such fees would be attracted in respect of tax deducted or collected at source on or after 01.07.2012.
B. A penalty ranging from a minimum of ₹10000 to a maximum of ₹100000 shall also be levied under new section 271H for not furnishing TDS statement within the prescribed time or furnishing incorrect information in the said statements in respect of tax deducted at source on or after 01.07.2012. Therefore, W.e.f 1.7.2012, penalty shall not be leviable under section 272A in respect of such failure. However, no penalty u/s 271H shall be levied for delay in furnishing of TDS statement, if the TDS statement is furnished within 1 year of the due date after payment of tax deducted along with applicable interest and fee.
C. Penalty will not be levied if reasonable cause of failure is shown to the satisfaction of AO.
Also, disallowance for payments of expenses attracting TDS provisions under chapter XVII-B will be attracted under Section 40 (a)(i)- for non residents & Section 40 (a)(ia) for residents
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