Short deduction of TDS

Get form 26A certified from a CA

As per section 201, a payer who fails to deduct whole or any part of the tax at source is treated as an assessee-in-default. However, the payer/deductor/employer who fails to deduct the whole or any part of the tax on the payment made to a payee shall not be deemed to be an assessee-in-default in respect of tax not deducted by him, if the following conditions are satisfied: [1] The recipient has furnished his return of income under section 139. [2] The recipient has taken into account the above income in its return of income. [3] The recipient has paid the taxes due on the income declared in such return of income. [4] The recipient furnishes a certificate to this effect from an accountant in Form No. 26A.

In other words, in case of non deduction of tax at source or short deduction of tax, in case of a payee, if all the discussed conditions are satisfied, then the payer will not be treated as an assessee-in-default. However, in such a case, even if the payer is not treated as an assessee-in-default, he will be liable to pay interest under section 201(1A). In this case, interest shall be paid from date when TDS was deductible till date of ITR filing by deductee (employee). Interest in such a case will be levied at 1% for every month or part of the month.