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Non deduction of TDS on advance payment

11 January 2010

Hi friends,

One of my clients has entered into an agreement with interior decorator for office furnishing and paid 10lacs in 3 instalments as advance. Now he wants to make deduct tax on entire amount of Rs.13lacs (at the time of final payment). does it attracts interest provision for late deduction.

Once he deducts tax will pay within time.

Thanks in advance.

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8 Replies

Amir (Learner) (4016 Points)
Replied 11 January 2010

Dear Ayesha,

Interest @ 1% /month will be attracted since TDS is to be deducted on earliest of payment or credit...

1 Like

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Ram Avtar Singh (Nagari Sultanpur U.P.Delhi) (14487 Points)
Replied 11 January 2010

Consequences of non-deduction of tax at source (TDS)

Under section 201, a person is deemed to be an assessee in default if there is a failure to deduct tax at source or for failure to deposit the tax deducted at source after such tax has been deducted. The persons covered under the ambit of section 201 are:-

(i) person referred to in section 200;

(ii) the principal officer and the company of which he is the principal officer in the cases referred to in section 194 [relating to deduction of tax at source on dividends].

Sub-section (1) of section 200 provides that any person deducting any tax at source on payments other than salary shall pay the sum so deducted to the Central Government or as the Board directs within the prescribed time. A view has been expressed that the provisions of sub-section (1) of section 201 do not cover failure to deduct tax at source. Such an interpretation is contrary to the intent of the legislature.

In view of the above, the sub-section (1) of section 201 has been amended to clarify that where a person, including the principal officer of a company who is required to deduct any sum in accordance with the provisions of Income-tax Act does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under the Income-tax Act, he shall be deemed to be an assessee in default under section 201.

So kindly deduct TDs and pay with interest

1 Like

Ayesha Banu A (.) (105 Points)
Replied 12 January 2010

Thank you friends for suggestions!!!

Can you suggest me do I need to revised TDS returns for last quarters (Q1 & Q2) in which my client has paid advance on which TDS is not deducted.

Thanks again.

Bimal Thacker (Proprietor) (762 Points)
Replied 12 January 2010

As you are going to deduct tax now. Take it in current quarter return.

Amir (Learner) (4016 Points)
Replied 12 January 2010

Dear Ayesha,

No need to revise earlier returns since there was no error in the returns the only thing was tax had not been paid earlier..

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C.A Alok Mukherjee (service) (462 Points)
Replied 18 March 2010

Amir, i have a question - Can it be a valid plea if someone failed to deduct tax at the then applicable rate and deducting tax at the present applicable rate with payment of interest? Let me explain suppose one person failed to deduct tax on rent of August'09 say 10% , on identifying the mistake he wants to deduct now but at present the applicable rate is 2%, I have no issue about the payment of interest. But are we legally correct to deduct tax at 2% instaed of 10%? your views please.