Defaults and Penalties in TDS Payments & TDS Return filing

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In case of failure to deduct TDS as mandated by the statutory provisions of the Income Tax Act, an individual may incur interest and penalty charges. This article covers the relevant Defaults and Penalties in TDS Payments & TDS Return filing. Understanding the consequences of TDS defaults is crucial for you, as it helps in avoiding potential financial penalties and legal repercussions.

Before we understand Defaults and Penalties in TDS Payments & TDS Return filing, let’s learn the duties of persons who are liable to deduct tax at source.

Duties of Individual liable to deduct TDS

  • Obtain Tax Deduction or Collection Account Number (as applicable).
  • Quote the account number in all TDS/TCS documents.
  • Deduct/Collect tax at the applicable rate.
  • Pay the tax deducted/collected to the government.
  • File periodic TDS/TCS statements through TDS Return Filing.
  • Issue TDS/TCS certificates for the tax deducted/collected.
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Due date to do TDS Return Filing

Quarter Due date of TDS Fillings  TDS Return Filing Period
1st Quarter 31st July of FY 1st April to 30th June
2nd Quarter 31st October of FY 1st July to 30th Sept.
3rd Quarter 31st January of FY 1st October to 31st Dec.
4th Quarter 31st May of FY 1st January to 31st March

Understanding the Strict Provisions of TDS and Its Severe Consequences

TDS is a strict provision in the Income Tax Act.

If TDS is not deducted, it has severe consequences:

  • Firstly, the defaulter is called “assessee in default.
  • 12%  Interest can levy on  the taxpayer.
  • Penalty can be levied up to the amount of TDS default.
  • 30% of the default amount is added to business/professional income if claimed as an expense, and tax must be paid accordingly.
  • If TDS is deducted but not paid or paid less, there is a risk of prosecution with a prison term of 3 months to 7 years and a fine.

To avoid such consequences, seek professional advice and exercise caution when dealing with TDS.

Consequences of TDS Defaults for Deductors/Collectors

The deductor/collector may face penalties and fines in case of TDS defaults, such as non-deduction or late deduction/payment of tax at source, or late/non-filing of TDS returns.

Various Consequences of TDS Defaults are listed below:

  • Non-deduction of TDS: Expenses may be disallowed from the assessment of overall revenue by the tax assessor.
  • Late deduction of TDS: Simple interest at a rate of 1% per month will be charged on the balance of the tax deducted at source.
  • Late payment of TDS: Simple interest at a rate of 1.5% per month will be charged on the amount deducted as tax.
  • Late filing of TDS returns: A penalty of INR 200 per day will be charged, not exceeding the total amount of tax deducted at source.
  • Non-filing of TDS returns: A penalty ranging from INR 10K to 100K may be charged by the assessing officer.
  • Deduction loss at source: The payer would have to relieve their tax liability in such circumstances.

Also Read:

How to claim TDS Refund for Facebook Ads?

Moreover, If you want any other guidance concerning TDS Return Filing, please feel free to talk to our business advisors at 8881-069-069.

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