Consequences of not deducting TDS and Nonpayment or Late payment

Penalty and Interest can be imposed if a person needs to reduce TDS. In the article, we cover the applicable interest and penalty for TDS default.

Interest for Nonpayment or Late Payment under TDS

Here is the TDS default for that the interest is payable.

1. A person who is subject to reduce TDS does not reduce TDS at all.
2. Person after reducing TDS fails to pay the main or part of the tax to the credit of deducting TDS fails to pay whole or part of the tax to the credit of the administration.

In the above cases of failures, the provisions of section 201 of the Income Tax ACT supplicate and interest is payable as under of

1. Interest in case of non-deduction of TDS– Interest will be imposed at 1% for every month or part of the month from the date the TDS was reducible till the date on which TDS actually reduced.
2. Interest in the case of no payment of TDS – interest will be imposed at 1.5% for each month or part of the month from the date on which TDS was reduced till the date on which TDS was actually credited to the administration.

More read :TDS under gst

Other provisions –

The provisions in the case of the TDS not reduced in the respect of payments completed to the resident.

As per proviso to section 201 of the Income Tax Act, if the person is responsible by law to reduce TDS fails to reduce the whole or part of the TDS on payment being completed to a resident and then in such case person is liable to reduce TDS can simply not be considered as assesses-in-default for non-education if all the below conditions are satisfied.

• The recipient is local in India;
• The recipient has provided his income tax return under section 139;
• The recipient has paid relevant taxes due on the income revealed in an income tax return filed by him;
• The resident payee furnishes a certificate from an accountant in form No. 26A to this effect.

If all the above conditioned are completed, the person If all the above conditions are satisfied, the person responsible to reduce TDS would not be treated as assessee in default for the non-deduction or less deduction of TDS and would respond to pay interest at 1% from the date on which TDS was reduced till the date the resident recipient has furnished his income tax return.

As per provisions of section 201(1A), it is compulsory to pay interest for delay in payment of TDS or for non-payment / non-deduction of TDS before filing TDS return.

TDS Penalty

The penalty provisions under TDS are as follows:

Penalty for Non-deduction / Non-payment of TDS

As per provisions of section 271C penalty for non-deduction/non-payment of TDS would be an amount equal to tax not so deducted/paid.

The penalty for Delay in TDS Return Filing

A person is liable to pay INR 200 per day as a penalty until the failure accurse. However, the highest penalty payable would be subjected to the TDS amount.