Section 271H of IT Act related to penalty if a person fails to file TDS or TCS returns/statements within the due date.
Current Provision
No Penalty if Compliance Within one Year
Sub section (3) of section 271H of IT Act states that no penalty shall be levied if the person proves that after paying TDS or TCS along with fees and interest to the credit of the central government, the person has filed the TDS/TCS statement before the expiry period of 1 year from the time prescribed for furnishing such statement.
Issues Due to Changes in Belated Return Filing Deadline
Earlier, taxpayers had up to one year from the end of the assessment year to file a belated return.
But, the deadline is now set to 31st December of the same assessment year. This change causes inconvenience to deductees or collectees if TDS/TCS statements by deductors /collectors are not filed promptly, leading to mismatches during Income Tax Return processing.
Proposed Amendment
No Penalty If Filing Within 1 Month
To ensure better compliance, it is proposed to amend sub-section (3) of Section 271H to provide that no penalty shall levied if person proves that after paying TDS or TCS along with fees and interest to the credit of the central government, the person has filed the TDS/TCS statement before the expiry period of 1 month from the time prescribed for furnishing such statement.
Effective Date
This amendment will take effect from the 1st day of April 2025.
For Example
For FY 2023-24 due date to file 4th quarter TDS return is 31st May 2024.
If not filed within the due date then,
- 234E Late Fees – Rs. 200 per day maximum of TDS amount.
- 201(1A) Interest – 1% or 1.5% whichever is applicable
- 271H Penalty – Earlier time limit for 271H penalty was 1 year i.e., 31st May 2025 but noe time limit will br one month i.e., 30th June 2024.
271H Penalty Amount
The Assessing Officer may direct a person who fails to file the statement of TDS/TCS within the due date to pay a minimum penalty of Rs 10,000 which may be extended to Rs 1,00,000.
FAQs
The case law of 271H is that if a person fails to file the TDS/TCS return within the due date, they are liable to pay a penalty of Rs 200 for each day of delay.
However, the penalty amount cannot exceed the total TDS amount due. Importantly, the return can only be filed after paying the late filing fee.
The amendment aims to to reduce the inconvenience caused by TDS/TCS mismatches during the processing of Income Tax Returns.
Minimum penalty amounting Rs. 10,000, which may extend to Rs. 1,00,000.