19 March 2009
-The Income Tax Department is levying interest u/s 201(1A) for variation in the deduction of the TDS on Salary on month to month basis for the last 3 years(2005-06,2006-07,2007-08). Sometimes the deduction is less than the average but sometimes it higher too. -TDS on Salary deducted and deposited on or before due date, everytime. -The Employer is passing the liability to Employees and recovering the same interest from the concern employees. - My query is 1. Whether the above approach is correct? 2. Is there any time limit for charging the interest u/s 201(1A)? 3. Whether it is the right interpretation of the quoted section.
19 March 2009
No Its not a right approach. Why should employee be suffer without fault. So Employer should bear all liabilities of Int on TDS less paid.
19 March 2009
Failure to deduct tax: Where the employer has failed to deduct tax or when short deduction of tax has been done, following statutory provisions are attracted :-
a) Charging of interest u/s 201(1A): The deductor is treated to'be 'assessee in default' in respect of the short deduction/non deduction of tax. Under Section 20H1A) he is liable to pay simple interest @ 15% per annum on the amount of tax in arrear from the date on which such tax was deductible to the date on which such tax is actually paid, to the credit of Central Govt, Charging of interest u/s 201(1A) is mandatory and there is no provision for its waiver.
Procedure for interest calculation: The calculation of interest is to be done as per Rule 119A and is summarised below :
(i) The period for which such interest is to be calculated is to be rounded off to a whole month or months and any fraction of month is to be ignored.
(ii) The amount of tax in respect of which interest is to be calculated is to be rounded off to nearest multiple of 100 ignoring any fraction of Rs. 100.
b) Penalty u/s 221: The assessee in default is liable to imposition of penalty where the assessing officer is satisfied that the defaulter has failed to deduct tax as required without good and sufficient reason. The quantum of penalty is not to exceed the amount of tax in arrear.
c) Penalty u/s 271C : A penalty equivalent to the amount of tax the deductor has failed to deduct, is leviable u/s 271C. Such penalty is however only leviable by a Joint Commissioner of Income Tax.
19 March 2009
According to Guidence notes to section 192, Excess or deficiency arising out of any previous deduction or failure to deduct tax at source during the financial year can be adjusted against subsequent deductions during such financial year(Sub-section(3)) - My concern is if any employee can change/declare the savings at the different point of time differently...it will effect the TDS amount for that month. -or may may from any other reason the TDs amount for the month may vary but if at the end of the financial year, the TDS is fully deducted and during the year also whatever deducted, deposited on time, whether Section 201(1A). -Section 201(1A) says if company does not deduct wholly or any part of the tax or after deducting fails to pay the tax shall be liable to pay interest. - Does`t it a debatabel issue that average tax per month can vary and interest should not be imposed on that on the basis of variation?
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