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non deduction of TDS (Income Tax)

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This query is : Resolved


( Author )
02 August 2010

Dear Expert,

please let me know the consequances of non deduction of tds and deposit of the same to the IT department.



CMA Ramesh Krishnan

( Expert )
02 August 2010

Related expenses will be disallowed and penalty will be the non deducted and not paid tds amount


CA. SANAT PYNE

( Expert )
02 August 2010

agree with rameshji,
in addition

If a person fails to deduct the whole or any part of TDS as required under any of the provisions of sections 192 to 196D then:
(a) The person responsible for deduction is treated as ‘assessee in default’
(b) He shall be liable to pay by way of penalty a sum equal to the amount which he failed to deduct.
(c) He shall be liable to pay simple interest @12% p.a. on amount of tax liable to be deducted.
Failure to Deposit TDS
if a person after deducting TDS fails to deposit the same, then:
(a) The person repsonsible for deduction is treated as ‘assessee in default’
(b) penalty a sum equl to the amount which he failed to deposit (SEC. 271C)
(c) simple interest @ 12% p.a. till the date of actual deposit in Govt. treasury.
(d) Rigorous punishment for a term which shall not be less then three months by may extned up to seven years and fine.( sec. 276B)


VINOD ARORA

( Expert )
03 August 2010

In adddition to the fact taht such expenses are disallowed for non-deduction of requisite TDS in due course, the Income Tax Act imposes heavy Interests and Penalties in case of a person who defaults in payment of any amounts to the Govt. collected on account of Tax Deducted at Source.

The penal provisions state that if any person responsible for deducting tax at source, does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax. The said penal provisions are equally applicable to an employer who has paid the tax on non monetary perquisites provided to the employee.

However it has been justified that no penalty shall be charged under Section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax.

In furtherance of above if any such person, principal officer or company does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay Simple Interest @ 12% per annum (1% per month) on the:

Amount of such tax from the date on which such tax was Collectible to the date on which the tax was Actually paid.

In addition to above such interest shall be paid before furnishing the Quarterly Statement for each quarter in accordance with the provisions Section 200(3). In case of non payment of tax as aforesaid after its deduction, the amount of the tax together with the amount of Simple Interest thereon shall be a Charge upon all the Assets of the person, or the company, as the case may be.



SUMMARY OF PENAL CONSEQUENCE

Failure to deduct the whole or any part of the tax deducted at source as required under Sections 192 to 206B in Chapter XVIIB of the Income Tax Act: Sum equal to the amount of tax which was due for deduction but was not deducted-Section 271C

Failure to deliver or cause to be delivered on time, a copy of declaration in Form No. 15G/ 15H as per Section 197A : Rs. 100 for every day during which the failure continues but the penalty shall be restricted to the amount of tax deductible-Section 272A(2)(f)

Failure to issue TDS certificates u/s 203: Rs. 100 for every day during which the failure continues-Section 272A(2)(g)

Failure to furnish the Statement required under Section 192(2C) relating to payment of tax on non- monetary perquisites of the employee :Rs. 100 for every day during which the failure continues-Section 272A(2)(i)

Failure to deliver or cause to be delivered on time, a copy of the Quarterly statement within the time specified u/s 200(3):Rs. 100 for every day during which the failure continues but penalty restricted to the amount of tax payable-Section 272A(2)(k)

Failure to deliver or cause to be delivered on time, a copy of the Quarterly statement within the time specified u/s 206A(1):Rs. 100 for every day during which the failure continues-Section 272A(2)(l)


Failure to apply for allotment of TAN (Tax Deduction Account Number) and failure to quote TAN in challans, certificates and statements or quote a number which is false, and which he either knows or believes to be false or does not believe to be true:Rs. 10,000-Section 272BB

Failure to pay tax deducted at source to the credit of Central Govt.:Punishable with rigorous imprisonment for a term of atleast THREE months, which may be extended to SEVEN years along with fine-Section 276B

Further these penal actions may not be started at assessing officer level, he also need approval from higher ups.



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