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Disallowance on non deduction of tds u/s 40a(ia)

NISHA AGARWAL (Chartered Accountant) (454 Points)

29 March 2019

Can penalty be imposed for non deduction of tds within due date.

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CA Charmie Jhaveri (Associate) (163 Points)
Replied 29 March 2019

interest will be levied for non deduction

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Sahil Jain (FAFD, DISA, CA) (Practicing Chartered Accountant ) (2476 Points)
Replied 29 March 2019

Yes interest shall be levied

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NISHA AGARWAL (Chartered Accountant) (454 Points)
Replied 29 March 2019

Originally posted by : CA Charmie Jhaveri
	interest will be levied for non deduction

CAN PENALTY BE ALSO LEVIED?

NISHA AGARWAL (Chartered Accountant) (454 Points)
Replied 29 March 2019

Originally posted by : Sahil Jain (DISA, CA)
	Yes interest shall be levied

CAN PENALTY BE ALSO LEVIED?

Radhey Shyam Jha (Student) (1567 Points)
Replied 29 March 2019

Let us see the impact of non-compliance of TDS provision through an instance:

If the expense of Rs 10 lakh was liable for TDS at 10%, then Rs 1lakh shall be deducted as TDS. For non-deduction/payment of Rs 1 lakh, expense of Rs 10lakhs shall be disallowed. This means that your expense increases with the same amount that in turn will raise your tax burden with Rs. 3,09,000.

Further, on non-deduction/payment of TDS, interest is levied depending on the period of delay. In addition, there is the penalty of Rs 1lakh. Above all, if the department finds non-compliance to be wilful, imprisonment is a certainty.

So, through this example, we can see that by not complying with TDS provisions, one might have to pay approximately Rs 5 lakhs and face the risk of imprisonment, instead of the required Rs 1lakh.

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Sahil Jain (FAFD, DISA, CA) (Practicing Chartered Accountant ) (2476 Points)
Replied 29 March 2019

Mr Radhey
Only 30% of expense shall be disallowed under sec 40a(ia) and not the entire amount if TDS has not been deducted then

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Radhey Shyam Jha (Student) (1567 Points)
Replied 29 March 2019

@ Sahil Jain Thank you for correction

Section 40(a)(ia) is amended via Finance Act, 2014 to restrict the amount of disallowance for non-deduction of tax to 30% of expenditure. The proviso is also amended to the effect that 30% of such sum shall be allowed as a deduction in computing the income of the previous year in which tax has been paid.

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