Section 271CA Penalty for failure to collect tax at source (TCS)

The provisions of section 206C of the Income Tax Act, 1961 mandates the specified categories of the seller to collect the tax (i.e. TCS) from the specified categories of the buyer, of the specified goods, at the given specified rates. In case the specified seller fails to collect the TCS, then for such failure, he would be liable to pay the penalty under section 271CA of the Income Tax Act.

Topics like the provisions of section 271CA; ways to avoid the penalty under section 271CA; and the amount payable as a penalty under section 271CA are taken up and explained in the current article.

Provisions of section 271CA of the Income Tax Act

The gist of penalty provisions of section 271CA is being explained here under –

• The section 271CA applies to the person who has failed to collect the tax at source (i.e. TCS); and
• The penalty under section 271CA can be imposed only by the Joint Commissioner.

However, it should be noted that in case the defaulter proves the reasonable cause for the failure, then no penalty is leviable in terms of provisions of section 273B of the Income Tax Act.

The time period within which the TCS is to be collected –

As seen, the penalty under section 271CA gets attracted in case the seller fails to collect the TCS. Hence it is important to note the time period within which the TCS needs to be Collected.

As per provisions of section 206C (1), the specified seller is required to collect TCS within earlier of the following dates –

• Date of debiting of an amount (payable by the buyer) to the account of the buyer; or
• Date of receipt of the amount from the buyer via Cash / cheque / draft / any other mode.

How to avoid the penalty payable under section 271CA of the Income Tax Act –

In order to avoid the penalty, the seller (who are required to collect TCS as per provisions of section 206C) is required to collect tax (TCS) within the following prescribed time –

• Earlier of the following dates –
  • Date of debiting the account of the buyer; or
  • Date of receipt of amount from the buyer via Cash / cheque / draft / any other mode of payment.

Further, even in case of default, if the seller proves the reasonable cause for the failure, then the penalty payable under section 271CA can be avoided.

Amount of the penalty payable under section 271CA of the Income Tax Act –

In case of default, the defaulter is liable to pay the penalty under section 271CA to the extent of a sum equal to an amount of tax not collected.

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