TDS - Consequences of Default

Lalit kundalia , Last updated: 27 February 2014
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TDS-

TDS means 'Tax Deducted at Source'. TDS is one of the modes of collection of taxes, by which a certain percentage of amount is deducted by a person at the time of making / crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government Account.

POINT OF DEDUCTION OF TDS
Time of Deduction	Salary: At the time of payment Others: When income paid or credited to the account including “payable” or “suspense” account whichever is earlier

CONSEQUENCES OF DEFAULT:

Default/ Failure	Section	Nature of Demand	Quantum of demand or penalty
Failure to deduct tax at source	201(1)	Tax demand	Equal to tax amount deductible but not deducted.
	201(1A)	Interest	@1 % p.m. of tax deductible.
	271C	Penalty	Equal amount of tax deductible but not deducted.

DUE DATE FOR DEPOSITING TDS
Quarter	Salary	Other Than Salary
April – Feb	7th of next month	7th of next month
March	30th April	30th April

CONSEQUENCES OF DEFAULT:

Default/ Failure	Section	Nature of Demand	Quantum of demand or penalty
Failure to deposit tax at source	201(1)	Tax demand	Equal to tax amount not deposited
	201(1A)	Interest	@1.5% p.m. of tax not deposited
	276B	Prosecution	Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine

DUE DATE DATE OF FILING TDS RETURN
	Non-Government Deductors
Quarter	Salary	Other Than Salary
First	July 15th	July 15th
Second	October 15th	October 15th
Third	January 15th	January 15th
Fourth	May 15th	May 15th

CONSEQUENCES OF DEFAULT –

Default/ Failure	Section	Nature of Demand	Quantum of demand or penalty
Failure to furnish prescribed statements u/s 200(3)	272A(2) (k)	Penalty	Rs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to file TDS return in time	234E	Fine	Rs. 200 per day will be levied on the deductor, as long as TDS Statement is not filed upto the maximum of TDS amount.
If deductor exceeds one year time limit to File TDS Statement. If deductor furnishes incorrect details like PAN, TDS Amount, Payment of Challan etc.	271H	Penalty	Deductor has to pay a penalty ranging from minimum of Rs. 10,000/- to One Lac rupees

IT IS MANDATORY TO PROVIDE TDS CERTIFICATE TO DEDUCTEES

Every person deducting tax at source is required as per Section 203 to furnish a certificate to the payee to the effect that tax has been deducted along with certain other particulars. This certificate is usually called the TDS certificate. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In case of employees receiving salary income including pension, the certificate has to be issued in form No.16.

CONSEQUENCE OF DEFAULT-

Default/ Failure	Section	Nature of Demand	Quantum of demand or penalty
Failure to issue TDS certificate u/s 203	272(A)(g)	Penalty	Rs. 100 every day during which the failure continues subject to maximum of TDS amount.

IN CASE, DEDUCTEE DOES NOT PROVIDE PAN-

Finance Act (2) of 2009 makes PAN compulsory in case of TDS eligible payments. Failing to that, Deductor will be making TDS at a higher rate!!

This has been made by introducing a new section 206AA into the Income Tax Act. As per this new section, Any Deductor making a TDS eligible Payment to a Party, who has not provided PAN, should make TDS at a higher rate.

For such case, the rate of TDS should be determined at higher of below conditions:

a. TDS rate prescribed in the Act

b. Rate of Tax in force

c. At 20%

CONSEQUENCE OF DEFAULT IN MENTIONING PAN-

Default/ Failure	Section	Nature of Demand	Quantum of demand or penalty
Failure to mention PAN of the deductee in the TDS statements and certificates	272B	Penalty	Rs. 10000