Non deduction of tds and non-filing of tds

This query is : Resolved

Guest

Guest (Querist)

25 June 2013 Dear Sir,

A partnership firm paid rent of Rs. 35000/- p.m. during the financial year 2012-2013 and has not deducted tds and not filed tds return.
What are the consequences ?
What if we deducted tds in march, 2013 and deposited in june, 2013.

CA.Vinita Gupta

CA.Vinita Gupta (Expert)
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25 June 2013 Is the Firm subjected to Tax audit if yes then please deposit the TDS along with Interest and file the return of Income

Guest

Guest (Querist)

25 June 2013 Thanks mam,
but firm is always liable to deduct tds then why u write if firm is liable

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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26 June 2013 Expenditure can be disallowed.
.
Penalty is leviable in such cases.
.
Prosecution provisions may also be invoked U/s 276B in case tax deducted but not deposited.
.
Please refer the link for more details -
http://blog.tdsman.com/2013/04/penalty-on-non-deduction-late-deduction-and-late-deposit-of-tds/
.
You can file TDS return by depositing TDS amount and interest for late deduction and deposition which is 1.5% p.m. for a month or part of the month.
.

Message likes : 1 times

Guest

Guest (Querist)

26 June 2013 Thanks Sir,

Sir if we deduct tds in March, 2013 and deposited in June, 2013 then rate of interest from April, 2012 to March, 2013 (i.e. from due date of deduction to actual date of deduction) = 1% per month or 1.5%

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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04 August 2024 ### Consequences of Non-Deduction and Non-Filing of TDS

1. **Non-Deduction of TDS:**
- **Penalty and Interest:** If TDS is not deducted, the firm is deemed an assessee in default under Section 201(1) of the Income Tax Act. The firm must pay the TDS amount along with interest. The interest for non-deduction is calculated at 1.5% per month or part of the month from the date on which the TDS was due till the date of actual payment.
- **Disallowance of Expense:** Under Section 40(a)(ia), if TDS is not deducted on rent payments, the amount paid is not allowed as a deduction while calculating the taxable income of the firm.

2. **Non-Filing of TDS Return:**
- **Penalty:** Under Section 272A(2), there is a penalty of ₹100 per day for every day of default in filing the TDS return until the return is filed. This penalty is applicable if the return is not filed within the stipulated time.
- **Interest on Late Payment:** Interest on late payment of TDS is applicable even if the return is not filed on time.

### Deduction and Payment of TDS in March and June

- **Interest Calculation:**
- If TDS is deducted in March 2013 but deposited in June 2013, the interest is calculated from the due date of deduction to the date of actual payment.
- **Due Date of Deduction:** TDS on rent for a particular month is due for deduction in the month in which the rent is paid or payable.
- **Interest Rate:** The interest for the period from the due date of deduction to the actual payment date is calculated at 1.5% per month or part of the month, as per Section 201(1A).

### Example of Interest Calculation

For instance, if TDS was due to be deducted on March 31, 2013, but was actually deposited on June 30, 2013:

1. **Interest Calculation from Due Date to Deduction Date:**
- For the months of April 2013 to June 2013 (i.e., 3 months), the interest is calculated at 1.5% per month.

2. **Total Interest:**
- If the total TDS amount was ₹35,000 per month, calculate the interest as:
- Interest = ₹35,000 × 1.5% × 3 months = ₹1,575

### Important Points:

1. **Legal Obligation:** The firm is legally obligated to deduct TDS at the time of payment and deposit it within the prescribed time limit. If there is a delay, it is necessary to pay interest and file a TDS return as soon as possible.

2. **Documentation:** Maintain proper records and documentation of all TDS-related transactions, including the reasons for any delays and steps taken to rectify them.

3. **Consult a Tax Professional:** It is advisable to consult with a tax professional to ensure compliance and to address any potential issues related to TDS non-deduction and non-filing of returns.