TDS

Details On TDS Penalty And Interest For Late Payment

What happens if you miss a TDS filing deadline? Keep reading to know all about the consequences of TDS default.

Tax Deducted at Source, commonly known as TDS was introduced with the objective of collecting tax from the very source of income. According to the concept of TDS, the deductor, has to deduct the tax at the source and remit this amount to the account of the Central Government.

The credit of the amount so deducted, calculated on the basis of Form 26AS or TDS certificate issued by the deductor, shall be given to the deductee.

The term deductor can be understood as the person who is liable to make a payment of a particular nature to someone else, known as a deductee,
The term deductee can be understood as the person from whose income, tax has been deducted at source. 

The relevant provisions of the Income Tax Act or the First Schedule to the Finance Act enlist the rates specified for such tax deductions. The tax rates specified under the Double Taxation Avoidance Agreements shall also be considered in the case of TDS with respect to non-resident persons.

TDS INTEREST FOR LATE PAYMENT

There are two types of TDS interest provisions:

  1. TDS interest for late deduction: The interest rate for late TDS deduction is 1% per month. This interest rate will be charged from the moment the tax became deductible until the date of deduction. The default of TDS interest for late deduction is outlined under Section 201A of the Income Tax Act. TDS return filing is only possible after paying this interest.
  2. TDS interest for late payment: Section 201(1A)provides for monthly interest payment of 1.5% on late TDS deposits after deduction. This interest is calculated on a monthly basis rather than on a daily basis. This is why even a portion of a month is seen as a complete month. Here the interest is calculated from the date the TDS becomes payable, i.e. from the date the TDS was deducted.

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Let us suppose your TDS due amount is ₹10000 and the due date is 10th January. If you pay the TDS on 27th May, then the interest payable will be ₹10000 x 1.5% p.m. x 5 months = ₹750.

Under the Income Tax Act, interest paid on late TDS deposits is not considered an expense.

TDS Not Deducted for Payment Made to Resident

According to Section 201 of the Finance Act, if the following circumstances are met, the payer who does not deduct the entire or a portion of the tax on the payment forwarded to the resident payee is not deemed an assessee-in-default for the tax which he has not deducted, when:

  • The resident recipient has provided his return for his income under Section 139.
  • The above income has been taken into account by the recipient resident in his tax return.
  • The taxes due on the income has been paid by the resident recipient on the income declared in such return of income.
  • A certificate to this effect has been furnished by the payee to this effect in Form no. 26A: https://incometaxindia.gov.in/forms/income-tax%20rules/103120000000007373.pdf

TDS DUE DATES FOR FINANCIAL YEAR 2021-2022

QUARTER PERIOD LAST DATE OF FILING
1st Quarter 1st April to 30th June 31st July 2022
2nd Quarter 1st July to 30th September 31st October 2022
3rd Quarter 1st October to 31st December 31st January 2023
4th Quarter 1st January to 31st March 31st May 2023

TDS DUE DATES FOR GOVERNMENT AND NON-GOVERNMENT DEDUCTORS

The due date for deposit of TDS for Non-Government deductors, is the 7th of the next month, except for the month of March. For March, the due date is 30th April.

Use Vakilsearch`s Income Tax calculator to decide your taxable profits and document your Individual Tax Return (ITR) with ease.

The due date for deposit of TDS for Government deductors  is the 7th of the next month if paid through Challan. And the same day on which the TDS is deducted if paid through book entry.

If the TDS payment due date falls on a Sunday or a public holiday, the TDS can be paid on the next working day.

PENALTY LEVIED FOR SHORT OR LATE PAYMENT OF TDS:

The deductor may face a penalty equal to the amount that was not deducted or remitted. He may even be liable to face rigorous imprisonment for a minimum of three months and a maximum of seven years. 

Click the link to check out the TDS penalty calculator on the Income Tax Dept. website.

Consequences of Late Filing

1st July 2012 onwards, a delay in providing the eTDS statement will result in a mandatory fine of ₹200 per day till the return is filed. However, in this case, the total fine shall not exceed the total amount of TDS deducted for the given quarter. The late filing fee has to be paid before the filing of such an eTDS statement. 

If there is a failure or delay in filing the eTDS statement for more than a year or the details such as PAN, Challan and TDS amount, furnished in the statement are incorrect, there may be a penalty ranging from ₹10,000 to ₹1 lakh, as determined by the Assessing Officer.

Reach out to the experts at Vakilsearch for help with your IT returns. Our taxation experts will ensure you are TDS and IT compliant all year round!

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