Article explains Provisions of Section 271C of Income Tax Act, 1961 which provides for Penalty for failure / non-deduction / non-payment of TDS.
Basically, as we know, ‘TDS’ i.e. Tax Deduction at Source is a system through which tax is deducted at the very source of income. Putting up simply, the TDS system works as under –
-The payer (i.e. deductor), liable for making payment of specified nature, is required to deduct TDS.
-The payer (i.e. deductor) remits the balance amount (after TDS deduction) to the payee (i.e. deductee).
-The TDS so deducted by the payer (deductor) is required to be deposited with the Government within the specified due dates.
The penalty provisions of section 271C of the Income Tax Act, 1961, comes into the picture only when the deductor either fails to deduct the TDS or fails to deposit the same within the prescribed time limit.
The present article explains the applicability of provisions of section 271C; summarizes the relevant due dates; the amount of penalty payable under section 271C and related Frequently Asked Questions (FAQ).
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Applicability of provisions of section 271C of Income Tax Act, 1961
The penalty under section 271C is applicable under the following conditions –
- The person fails to deduct, the whole or part of, tax at source (i.e. TDS).
- The person fails to pay, the whole or part of, Dividend Distribution Tax (DDT) on the dividend distributed [i.e. tax as required under section 115O (2)].
- The person fails to pay, the whole or part of, tax on winning from lottery or crossword puzzle [i.e. tax as required under section 194B].
It is highly pertinent to note here that the penalty under section 271C shall be imposed only and only by the Joint Commissioner.
Further, it should also be noted that in case the defaulter proves the reasonable cause for the failure, then, as per section 273B of the Income Tax Act, the penalty cannot be imposed under section 271C, on the defaulter.
Relevant due date for payment of TDS to avoid penalty leviable under section 271C
In general, in order to avoid the penalty leviable under section 271C, the deductor is required to deduct TDS within the earlier of the following dates –
- Date of credit of specified income to the account of the payee; or
- Date of payment of specified income through cash or draft or cheque or any other payment mode.
In order to avoid the penalty leviable under section 271C, the deductor is required to deposit the TDS within following due dates –
| Type of Deductor | Due date | Remarks |
| Normal Deductor
(Other than the Government Office) |
Within 7 days of the following month in which TDS is deducted. | Time limit applicable for the months of April to February |
| On or before 30th April in case of income credited or paid in the month of March | Time limit applicable for the month of March | |
| Government Office | Same day | In case the tax deducted has been paid without the production of the challan |
| Within 7 days of the following month in which TDS is deducted. | In case the tax paid is accompanied by an income tax challan. |
Amount of penalty payable under section 271C of Income Tax Act, 1961
In case of default, the penalty under section 271C is leviable to the extent of an amount equal to TDS not deducted / not paid.
FAQs on section 271C of Income Tax Act, 1961
Q 1. What is Chapter XVIIB?
Ans: Chapter XVII of the Income Tax Act covers provisions relating to ‘Collection and recovery of tax’. Part B of Chapter XVII (i.e. Chapter XVIIB) covers all the sections relating to ‘Deduction at source’.
Q 2. Is TDS deduction mandatory?
Ans: Yes, in case the TDS provisions are applicable, then it is mandatory for the deductor to deduct the TDS.
Q 3. What is the penalty for not deducting TDS?
Ans: As per provisions of section 271C of the Income Tax Act, in case the deductor fails to deduct the TDS, then he would be liable to pay an amount equal to TDS not deducted.
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