Section 201(1A) TDS Interest, Section 234E Late Filing Fee, and Section 271H TDS Penalty

Interest and penalty on TDS– If payment of TDS is not made in the specified time or/and return filing of TDS is not complete before the due date then the Income Tax act imposed interest and penalties for the default made by the deductor.

Interest and Penalty on TDS

Interest and Penalty on TDS- In this post, we are discussing Interest chargeability for non-payment of TDS {Section 201(1A)} and the imposition of different penalties for non-filing, late filing, and incorrect filing (Section 234E and 271H) of TDS returns.

Section 201 (1A)- Interest chargeabilty for Non-payment or late payment of TDS

As per section 201(1A) of the Income Tax Act, there are two different rates of interest on TDS, one is for non-deduction of TDS and the second one is for TDS deducted but not deposit on time.

Non Deduction of TDS (either in whole or in part)- If tax is required to be deducted and not deducted by the deductor then the interest rate is 1% per month (12% per annum) from the date on which tax was deductible to the date on which it is actually deducted.

Non-payment of TDS (either in whole or in part)- If tax is deducted but not paid by the deductor then the interest rate is 1.5% per month (18% per annum) from the date on which TDS is required to be deducted till the date of actual payment of TDS.

Note 1:- The above interest should be paid before filing of TDS return.

Note 2:- It is to be noted that at the time of calculation of interest, part of a month will be considered as a full month.

Also Read- Time Limit to Deposit TDS and to file TDS Return

Penalties/fine chargeability for non-filing or late filing of TDS Return

A person who fails to file a TDS return on or before the due date as prescribed then he shall be liable to pay a sum of late fees as prescribes under section 234E and/or he may also be liable to pay a penalty as prescribed under section 271H.

Late filing fees under section 234E

As per section 234E, where a person fails to file a TDS return on or before the due date then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues.

Note:- The amount of late fee will be subject to the maximum amount of TDS.

Also Read: TDS returns and forms- All about Form 24Q, Form 26Q, Form 16, and Form 16A

Penalty under section 271H

Under Income Tax Act, 1961 section 271H prescribes a penalty for two types of default. one is for a person who fails to furnish the TDS return within the prescribed time and the second one is for the person who furnishes incorrect information while filling the TDS return.

As per section 271H, The defaulter would be liable to pay a minimum penalty of Rs. 10,000, however, the maximum amount of this penalty may be extended to Rs. 1,00,000.

Note:- This penalty is in addition to the penalty under section 234E.

Frequently Asked Questions (FAQs)

  1. What is the penalty for late filing of TDS Return?

    As per section 234E, where a person fails to file a TDS return on or before the due date then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues. The amount of late fee will be subject to the maximum amount of TDS

  2. What are the documents required for TDS returns?

    General documents for filing TDS return are PAN Card of the deductee/PAN Number, tax payment challan, TDS certificates, bank a/c information, other details in respect of income on which TDS has deducted.

  3. Is Interest on TDS penalty?

    Interest and Penalty on TDS- No, Interest on TDS is not a penalty. Where Interest on TDS is charged under section 201 (1A) which is chargeabilty for non-payment or late payment of TDS and on the other hand, the penalty defined under section 271H which is for fails to furnish the TDS return within the prescribed time and for furnishes incorrect information while filling the TDS return.

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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.

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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)

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