TDS Penalty and Interest for Late Payment under Income Tax Act, 1961.

In cases of non-filling, delayed filling, non-payment or imprecise deduction of TDS, the tax department charges penal interest from the taxpayer. The penalty shall be notified to the taxpayer, once a faulty return or incorrect tax payment is submitted to the department.

 

In this post, you will get to know the TDS penalties being charged by the department on various TDS issues and the coming deadlines for filling your upcoming TDS returns to keep yourself away from such penalties.

 

TDS Penalties 

 

Case #1: TDS Interest Penalty for Non-deduction or Late deduction of TDS 

 

In case, the deductor (being the payment giver) fails to deduct TDS on the appropriate date on which it has to be deducted while making payment to the other party, he shall be charged with the penal interest of 1% per month. The penal interest levied on the taxpayer will become applicable from the date of tax-deductable till the date of actual TDS deduction.

 

For instance, if TDS has been deducted on 24th May on Rs 5 lakh and was deducted on 15th June in such case interest will be charged for 2 months I.e. May and June which will amount to Rs 5 lakh x 2 x 1% = Rs. 10,000.

 

Case #2: TDS interest Penalty for Non-payment or delayed payment of TDS to department 

 

For delay or non-payment of TDS amount to the department, a penal interest of 1.5% on per month basis has been subjected as per Section 201 (IA). For calculation of interest, even a few days of the month shall be considered as a default of the complete month and penal interest will be charged on a monthly basis and not on the number of days.

 

For instance, payment after TDS deduction to the department was made on 24 July, while it has to be submitted in June. The TDS penal interest will be charged for 2 months being both June and July. In short, the payment has to be made from the specified date from the date it was deducted and the date it has to be actually submitted as notified by the department timely.

 

Note: TDS has to be submitted within the due date specified by the department, a delay of a single day can even bring a charge penal interest for 2 or more months. For instance, if the due date for making payment of TDS is 7th February for TDS deducted on 10th January , then for payment made after the due date (I.e 7th February here) penal interest will be charged from 10th January and not from 7th February , which is date from actual deduction and date on which is actually paid.

 

Case #3: TDS Penalty For Short Payment of TDS to department 

 

In case the taxpayer fails to pay the TDS deducted to government timely, then subject to the provisions of Chapter XVII-B, the deductor or the payer shall be punished with rigorous imprisonment for a minimum term of 3 years which might extend up to 7 years including additional penal fines imposed.

 

Case #4: TDS penalty for Non-furnishing/delayed furnishing of TDS return or TDS e-statements 

 

For not filling of TDS statement as referred in Section 234E and Section 271H of the IT Act, a penalty of Rs 200 per day shall be charged from the notified due date of the department till the actual date of furnishing TDS statement. The maximum amount to be charged as penalty in such a case shall not exceed the total amount of TDS to be paid in such a quarter.

 

The imposed TDS penalty shall have to be paid before filing such a delayed e-TDS statement.

For instance, if the due date for furnishing e-TDS statement is 26 July but was submitted on 25 August and the TDS amount is Rs 5,000 then the penalty shall become 30*200 = Rs 6000, but higher than actual TDS, then only Rs 5000 has to be filed as a penalty.

 

Note: Section 271H also covers the penalty for incorrect filing of TDS return.

 

Things to Know   

 

ü Penal interest has to be submitted to the department before furnishing TDS return or as per demand raised by TRACES.

ü Penal interest paid on non-filling/delayed filling or other TDS penal issues shall not be allowed to be claimed as an expenditure as per the Income-tax act.

 

Payment of TDS Penalty 

 

  • Login to the Income-tax e-filing portal
  • In the left sidebar, Click on the e-Pay tax  
  • Proceed to the NSDL website.
  • Fill in Challan ITNS 281 with appropriate details and the TDS penalty amount.
  • Click on ‘Submit and Proceed’ and Make payment with the required payment mode selected.

Also Read: How do I file a TDS returns online?

TDS Filing Due Dates 

 

Transaction Type / Filling Period Due Dates for Depositing/ TDS Return Filling 

 

#1 For TDS on Payments (e.g., Salary, Commission, rent, etc) for both government or non-government institutions & individuals.

 

#2 TDS on payment property purchase 

 

#3 Quarter – 1 (1st April to 30th June )

 

#4 Quarter – 2 (1st July to 30th September)

 

#5 Quarter – 3 (1st October to 31st December)

 

#6 Quarter – 4 (1st January to 31st March )

 

 #1To be deposited by 7th of next month

 

 

 

 

#2 To be deposited by 30th of next month

 

#3  To be filed before 31st July 2019.

 

 

#4 To be filed before 31st October 2019

 

#5 To be filed before 31st January 2020

 

#6 To be filed before 30th April 2020

 

 

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