CA Pratik Anand
Following communication has been hosted on the CPC (TDS) Website-www.tdscpc.gov.in on 17th September’2014.
Dear Deductor (TAN: ),
As per the records of the Centralized Processing Cell (TDS), it has been observed that there is “No Tax Deposited” during the period April 1 to August 31, 2014 while tax has been deposited in the corresponding period in Financial Year 2013.
It may be possible that either the Tax may not have been deducted at source or the Tax deducted may not have been deposited, within stipulated time. In such case, this may lead to Short / Late Deduction and / or Short / Late Payment Defaults.
Please make note of the following important information:
Please note the provisions ofsection 200(1)of the Income Tax Act, 1961; in this regard:
Duty of Person deducting Tax:
- Any person deducting any sum in accordance with [the foregoing provisions of this Chapter] shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.
- Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.
- Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time,[prepare such statements for such period as may be prescribed] and deliver or cause to be delivered to the prescribed income-tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.]
- If the tax is not paid in accordance with the provisions of the Act, it may attractpenal Interest u/s 201(1A) and 220(2)of the Act.
- Any such interest paid above will not be considered as deductible expense under the provision of section 40(ia) of the Act.
Actions to be taken:
• If any amount needs to be deducted and/ or deposited, immediate action may be taken at the earliest.
• Please inform us with the reason for “No Tax Deposited” at firstname.lastname@example.org.
Analysis of the CPC Communication
Here the CPC(TDS) is reminding those who have not deposited any Tax at Source during the FY 2014-15 to do so if they are liable to deduct TDS but have not deducted TDS due to mistake or otherwise.
The CPC is also reminding deductors to deposit the due TDS if such TDS has been deducted but has not been deposited due to inadvertent mistake or otherwise.
Let us look at the important points with regard to the above:
1. If the deductor actually is not liable to deduct TDS:
- Here it may be noted that the CPC has introduced a new facility, where it has enabled a facility where the deductor can make a declaration for non-filing of TDS statements.
- Non-filing generally arises due to non applicability of TDS provisions to the assesse i.e where the person is not liable to deduct tax at source. In that case the deductor can file a declaration with the CPC that it was not required to deduct any tax during the concerned tax period and has therefore not filed the TDS Return.
- Here the deductor can make declaration for non-filing of the Return due to the following reasons:
- Not liable to deduct tax for the selected tax period
- No payment made/Credited to the payee
- Permanent/temporarily closed down the business
- Payment below the threshold limit
- Any other reason for not furnishing the return
The deductors should file this declaration in order to avoid notices from the TDS ward for non-filing/non-payment of tax at source.
2. The deductor was liable to deduct tax at source but has not deducted such tax at source:
- Non-deduction of Tax at source gives rise to deduction defaults.
- It also gives rise to demand of interest @ 1% per month from the date when tax was deductible to the date when it is deducted.
- Expense can be disallowed non-deduction of tax at source u/s 40a(i)/40a(ia).
- Some of the common expenses on which Tax is deductible at source are Interest, Salary, fee for technical services and professional services, brokerage or commission, rentals etc.
3. The deductor has deducted TDS but has not deposited the same:
- Non-deposition of TDS after deduction is a bigger offence then not deducting TDS itself.
- It attracts higher penal interest @ 1.5% from the date tax was deducted to the date of payment.
- Notice of prosecutionu/s 276B can be also be initiated for non payment of tax deducted at source(Although such notices are issued only when the amount involved exceeds a prescribed limit and the delay is beyond a prescribed period as listed in the internal CBDT Guidelines to the TDS Department)
- Expense can be disallowed non-deposition of tax at source u/s 40a(i)/40a(ia).
Hope you find the above information relevant and useful in your daily practice.
(The author is a CA in practice at Delhi and can be contacted at: E-mail: email@example.com, Mobile: +91-9953199493)