In the last post on TDS, we discussed the due dates for payments of TDS and due dates for the return filing of 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 penalties on TDS- In this post, we are discussing Interest chargeability for non-payment of TDS and imposition of different penalties for non-filing, late filing, and incorrect filing of TDS returns.
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, a month will be considered as a full month.
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 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.
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 Tax deducted at source return within prescribe the 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 till Rs. 1,00,000.
Note:- This penalty in in addition to penalty under section 234E
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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)