In Recent past we noticed that department has taken late payment of TDS very seriously and in addition to imposing Interest and Penalty for Late Payment, they also start initiating Criminal Prosecution against those responsible for Deduction and Payment of TDS. MD of a Hyderabad based company been jailed for TDS payment defaults – Company’s MD Sentenced 3 months rigorous imprisonment for TDS default. We are discussing here the consequences of Non Payment or Late Payment of TDS.
Page Contents
1. Consequences of Failure to deduct TDS or Pay the TDS after deduction
A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit it to the credit of Central Government’s account
a) Disallowance of expenditure under section 40(a)(i) of and section 40(a)(ia)
As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.
However, if tax is deducted or deposited in the subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.
Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.
However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.
b) Levy of interest under Section 221
If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201 and shall be deemed to be an assessee-in-default in respect of such tax and liable for penal action u/s 221 of the Act. Further Section 201(1A) lays down that such person shall be liable to pay simple interest
(i) at 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.
Such interest, if chargeable, is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.
c) Levy of Penalty under section 271C for TDS non-deduction or non-payment
Penalty of an amount equal to tax not deducted/paid could be imposed under section 271C. Penalty shall be charged under section 221 if deductor fails to deduct and pay tax to the credit of Central Government. The penalty shall be levied to the extent the Assessing Officer directs, however, the total amount of penalty shall not exceed the amount of tax in arrears.
d) Prosecution under Section 276B
Further, section 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time, as above, the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, along with fine.
2. Due date for deposit / Payment of TDS
Tax deducted at source shall be deposited to the credit of Central Government in accordance with the following provisions:
1) In case deductor is an office of the Government
Particulars Due Date
a) Where tax is paid without production of an income-tax challan On the same day when tax is deducted
b) Where tax is paid accompanied by an income-tax challan. On or before 7 days from the end of the month in which the deduction is made or income-tax is due under Section 192(1A)
2) In case of any other deductor
Particulars Due Date
a) Where the amount is credited or paid in the month of March On or before 30th day of April
b) In any other case On or before 7 days from the end of the month in which the deduction is made or income-tax is due under sub-section (1A) of section 192
Any sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.
3. Mode of payment of TDS
Taxes deducted at source shall be deposited to the credit of the Central Government in following modes:
1) E-Payment: E-Payment is mandatory for :
a) All the corporate assesses.
b) All assesses (other than company) to whom provisions of section 44AB of the Income Tax Act, 1961 are applicable.
Physical Mode: By furnishing the Challan No. 281 in the authorized bank branch
Note:
When tax is deducted/collected by government office, it can remit the amount to the Central Government without production of an Income-tax challan and by making only book adjustment. In such a case, it has to furnish Form No. 24G to NSDL with in prescribed time-limit.
I have paid my rent for the period Apr2020-Aug 2020 on october 2020 and remitted my tds on same day should i have to pay interest for these period
NH land acquisition amount received after deduct the TDS amount FY 2018-19. Govt issued a own letter for TDS deduction, But till this date the amount has not been deposited. In this case who is liable for tax and penalty? What can i do for further action in this regard?
Hello sir,
I had deduct one amount of tds two times and deposit also. what should i do for this.
Sir, I paid tax for the years 2015-14, 2015-16 but for those years refund came in my account and one through cheque. But, Now one letter came for less payment of tax for those FY s. Give me the solution
Dear Sir,
I am currently purchasing a flat under construction since 2016.
Since i was required to pay a few installments earlier on, i paid them and also cut TDS of 1% for them . All except 1.
This year i realized i missed one and paid for the same with penalty of 100%.
Can i claim the TDS amount as refund from the builder as i have paid TDS with penalty.
Kindly guide me on my options.
sir
I have filed zero tds return quarterly but unfortunately I have have not deducted tax in.Q3 & Q4.what will be the penalty and interest for rewising the Tds return.
I have got demand notice for late payment of tds of rs 340 last month.i have not deposited interest till now.will i have to pay rs 340 only or interest will be levied for thos one month and upto what amount.
31.03.2016 UNPAID RENT TDS AMOUNT IS Rs. 70000/-, I WANT TO PAY ON DATED 25.02.2017 , THEN WHAT WILL THE PAY AMOUNT WITH INTEREST.
Dear sir, I am the buyer and forgot to deduct TDS at the time of sale proceeds in 2015. The valve of the property is around 1 cr. Seller had initially agreed for paying TDS directly so that he can take credit during tax IT return filing. But now the seller is expecting me to pay the TDS . Kindly guide me how to manage this situation.
In case, TDS was to be deducted on 10th Dec. However, it was deducted on 10th Jan, this would naturally attract int for late deduction. But, if the TDS so deducted is deposited in time, i.e before 7th of Feb, would it also attract interest for late payment?
Hi
I purchased a property in May 2014 under tri-party agreement. I was not completely aware of the TDS process as no one explained to me during sale. Moreover bank was directly paying 75% the amount to builder directly. So I ended up paying full installment value without deducting TDS. Now I got a letter from IT about the delay and the penalty and interest together will be much more than the actual TDS amount. Also it’s not that I kept the amount with me; I actually paid the builder in full. Can you please advise what shall I do now?
Sir-namskar mera TDS 2009-10 2010-11ka rifunda nahimula mai LIC AJENT HOO
we have deducted tds and remitted the tds amount in time.we could not e-file our tds return with the time allowed. the tds relates to last quarter of 2014-15.we have received the penalty notice for levy of penalty under section 234-E on 01.06.2015.we have also replied to the penalty notice askin to cancell the penalty.since now we have not paid the amount.will the penalty amount attracts interest and at what rate?
we have deducted tds in time and paid the amount in time.we have failed to upload e-tds return for the last quarter of 2014-15 in time and subsequently uploaded.we have received the penalty notice under section 200 for levy of penalty under section 234E.the notice is dated 01.06.2015.we are yet to pay the amount.will the default attracts interest and at what rate?
A person deducts TDS with an intent to keep the amount to himself and making less payment to the payee. The person also does not give any certificate to the payee even after repeated requests. What options are available to the payee? Can the payee file an FIR against the payer for intent to cheat?
Articles is very good.
Dear sir,
we deduted tds from professional charges but we can not deposit in govt.a/c but after 6 month we have deposited this amt. how much penalty is applicable in this regards.
thanks
I have bought an apartment from a person over Rs 50 Lac value ; however we did not deduct the TDS at the time of the transaction as we were not aware bout the new rule.
Now , I am willing to pay the TDS with penalty ; however the previous owner is not showing interest in paying for the same or refunding the amount.
In such case , what is a way to get the refund from previous owner
But I want to see how they recover TDS dues from Kingfisher Airlines which deducted TDs but did not pay it into Govt. Treasury.
It is very easy to put a tax payer behind bar and punish him. It is also safe for police – no danger to his family.
It is difficult to catch a gunda criminal and prove him guilty. It is risky to arrest gundas, they may harm fmily of police.
The above shows ground reality. Out police and our governments are is more busy in looking after technical defaults than real crimes.
There should not be any criminal action for technical defaults, or delays in payment of taxes. Let administration and police look after real criminals. please read article on
taxmanagementindia.com/visitor/detail_article.asp?ArticleID=2000
OME SUGGESTIONS TO REDUCE CRIMES make police and courts friendly service providers of public.
By: C.A. DEV KUMAR KOTHARI : View Profile
Synopsis:
If police is relieved of un-necessary burden, court proceedings are made simple and speedier, police force gain more confidence in public as a service provider and friend of public, then police and courts will have more support from public and time to book real criminals timely and effectively. If honest people and public at large have no fear of police and court proceedings, the public will willingly come forward to help police and courts in booking criminals. Indirect support and benefits (time gain and diluted punishment) provided to dishonest and criminals by way of lengthy legal proceedings must come to an end so that honest people get relief on time. Eye watcher, witnesses, public and victims can come forward willingly and fearlessly and help police to reduce crimes and criminals to be afraid of anyone standing nearby.
About the article:
Though this website is not for criminal matters, yet the issue of crimes concern readers/visitors of websites as a member of society. The recent public outrage against Delhi Rape case is an eye opener. Lot of discussions are going on how to make law against rape more effective. However, author feels that law must be more effective in case of all real crimes. Unfortunately, undue weight age is given to deemed crimes and real crimes get back seat. It is time to re- think on this issue and relieves police force from un-necessary burden about deemed crimes so that they can devote more time to book real criminals and stop chasing deemed criminals who are easy to find out and can be potential source of extortion by police itself.
Regarding better check and control over criminals and dishonest people I would like to make following suggestions so that criminals and dishonest people can be tackled more effectively, timely and vigorously so that criminals and dishonest people have more fear of law and law enforcing agencies.
Reduce un-necessary burden on Police:
I feel that services of Police Force should be used only where it is necessary and un-necessary burden on police should be avoided by making changes in law to restrict deemed crimes and by allowing more time to regularize technical lapses, defaults, delays etc. before a criminal case is launched about deemed crime on technical, procedural and monetary issues involving some lapses, delays or default without intention to commit a fraud.
Un-necessary burden on police and courts handling criminal matters:
Police and courts are un-necessarily burdened with matters where police can hardly do anything, and where there is no real crime but just deemed defaults or crime. Just few examples:
Criminal cases for technical or procedural lapses, defaults, and delays etc:
Criminal cases for technical or procedural lapses, defaults, and delays in corporate, business, tax, labor law matters etc. should be avoided to reduce burden on police. For example , prosecution can be launched if a company made late deposit of PF , Tax, or failed to deduct tax, or belatedly filed annual report , annual return or there was some technical default in taking or repaying loan otherwise than by banking channel etc. On such matters prosecutions are launched on individual, company and its directors and other principal officers, partners of firm etc. Large number of cases are launched about such defaults and most of them are futile exercise but causes lot of wastage of time of courts.
I recall, during tenure of Shri V.P.Singh as Finance Minister there was too much emphasis on launching of prosecution cases, (may be because VPS, had prejudices against business community). In only one case 105 cases were launched for not deducting tax while making payment to contractor. The Tribunal had already decided that tax was not deductible and this was confirmed by High Court in due course and department accepted the same. Yet prosecutions cases were launched and the concerned officer was very happy as he could meet the target of launching prosecutions for three years. This was un-necessary. Most of cases have been dismissed. About 25 cases were pending in courts few years back, – — may some are be still pending, though they could be withdrawn by Income-tax Department. Or could be summarily dismissed by the Court because there is no cause when Tribunal has held that tax was not deductible. It seems that neither the concerned advocate nor the court are interested to dispose off cases even when matter is covered and can be quickly disposed off.
Cases in which there was only delay and same has been regularized also by filing documents or depositing money and paying interest etc. launching of prosecution / criminal cases serve hardly any purpose.
Cheque dishonor cases- S. 138 of N.I. Act:
More time should be allowed to drawer of cheque, to make promise and pay the amount within reasonable time (say 30 month), before a criminal case can be launched against him.
Large number of cases are launched for dishonor of cheques. Many of them are dismissed for technical lapses in drafting or filing of complaint and many deserves to be dismissed due to payment by drawer of cheque during pendency of criminal case, but cases continue because payment is not considered as curing default committed due to dishonor of cheque. Where payment has been made the case should be closed after ordering some penalty based on time scale.
Report of loss of share / bonds, debentures, certificates etc.:
Report of loss of share / bonds, debentures, certificates in course of transit or from home or office. Filing of a FIR or GD/complaint is mandatory for issue of duplicate certificates by company. There is hardly any purpose which can be served by merely filing FIR or GD. Property in shares is intact as the shares are registered with company. Such requirements of FIR or GD with Police Stations, where police can hardly do anything must be avoided to save valuable time of police. Advertisement of loss of certificates and application for duplicate certificates on websites of MCA, Stock Exchange, SEBI and company will be more effective.
Protection of VVIP:
There is excessive protection to VVIP and visits and places of visit by VVIP which can be reduced to provide a bit more protection to general public.
The list will contain many more such events which require involvement of police which can be avoided. A comprehensive analysis is required to find out efficacies of deemed crimes and prosecutions lanched for the same.
Therefore, role of police in such cases can be avoided to reduce burden on police. The Police Force should be dedicated to check and control real crimes and not assumed crimes and technical defaults or delays in compliance of law or commitment.
Quick disposal of cases:
In respect of most of litigation quick disposal of cases is required so that one can have feeling of finding justice on time and in real sense. Delay in justice is one of important reason of crimes, and dishonesty and fearlessness amongst criminals and dishonest people.
I find that in case of fair and reasonable dealing- whether it be in business or in personal matters, marital matters, family matters, social matters, financial and business matters there are hardly any dispute when people are honest.
Honest people want to avoid disputes and litigation – in fact honest people want to avoid police and courts. The popular very old saying in India is “Bhagwan Thane aur Kachahari se bachaye”. In reality we find that many people prefer to suffer some loss, damages, and pains instead of going to police and courts because of fear of uneasiness, wastage of time and money, and possible harassment etc.
My feeling, my own experience and my knowledge based on reading of judgments many times force me to question “Whether, courts in India are meant to help dishonest people and criminals”?
As per my experience and a bit of knowledge, as an ordinary citizen, I feel that in many of cases (around 75%) answer would be YES?
Many times we forgo many receivables because we have feeling that filing of Money Suit will not serve much purpose because when concerned party has developed dishonesty, he will rather like if creditor go to court so that debtor can simply say the matter is sub judice and so creditor will be refrained from reminding to him, and talking terms will come to an end.
Further because it will require costs and time both and will cause lot of distraction from work.
In some property matters l was forced to institute suit against dishonest people (my tenant and a co-owner in building and few vendors) because it was not possible to forgo my proper rights in properties. Simple matters of fixation of fair rent (even when it was agreed by tenant but later not paid), getting re-possession of purchased property from the vendor who illegally and forcefully took back possession are pending in courts for 8-10 years. These cases could be disposed off easily within 6- 9 months but unfortunately it takes decades because of un-necessary lengthy processes and steps, and delaying tactics of dishonest parties and their advocates.
Honest people suffer:
Even if the justice is rendered, it is very late and in the process of litigation dishonest people get benefits whereas honest party suffers. This is true in case of criminal cases also. Due to slow and lengthy process, criminals are not afraid of law, the suffering party can face harassment, and time loss, financial loss etc. therefore, and many of them avoid approaching police and court. Public feeling is that un-reported cases are many times more than reported cases of crimes and dishonesty.
Many time people just watch crime happening, victim suffering but avoid going to police and / or court with another popular and old saying “police ke pachre me kon pare?” and popular advise “Police ke pachre me mat paro”.
These sayings are very old and people have been habituated to see, feel and also suffer but avoid police and courts.
Another old and popular saying is “doctor, vakil aur police se Ramji bachaye”.- this is also reflective of fear from these people because many of them have tendency to put people in vicious and time consuming costly treatment or proceedings.
Mindset must now change. With advanced technology of information, communications and evidences etc. there can be easy and quick disposal, if both parties are given limited time and chances to file their pleadings in writing and counter reply and objections by opposite party.
Advocates Role to expedite disposal of cases:
Advocates can play big role in pleadings before courts and disposal of cases. Unfortunately, many of advocates are found indulging into delaying tactics- particularly for dishonest clients who know well that his case is weak and his case will be lost so they want to gain time by adopting delaying practices.
There must be more moral check amongst Advocates. An advocate should not take case of dishonest people- a case which apparently seems to be with dishonest intention, should be denied.
If an advocate is found to plead cases which are apparently based on dishonesty and criminality of his client, his enrollment as an Advocate must be cancelled.
If an advocate is found to indulge into delaying tactics, and pursuing frivolous cases, just to gain time for dishonest client, his practice certificate should be cancelled.
The judges can suo moto take action against parties and advocates which are apparently dishonest or at least judges can expedite disposal of case by denying longer and frequent time by adjourning hearing on request of party who apparently or prima facie is a wrong doer.
It is wrong to say that there is shortage of judges:
In my personal view it is wrong to say that there is shortage of judges. The delay in rendering justice is not due to shortage of judges but due to lethargic working system, lengthening proceedings un-necessarily by interested parties, many steps which could be compacted and completed in time bound manner but are prolonged, many times adjournments due to various reasons, and therefore low and delayed disposal of cases due to delaying tactics adopted by parties to suit and their advocates.
For example, the proceedings can be compacted by asking parties to suit to file question for examination, all documentary evidences along with petition or within some time thereafter, to provide petition with copies of all documents and evidences to opposite parties and by asking opposite parties to file reply with copy of all documents and evidences relied on by opposite parties within a limited time.
Thereafter, analysis of undisputed facts can be made where court can avoid examination of witnesses or documents. Only on disputed facts, and issues further examination can be made.
In our present system there are so many steps and it may take years to frame issue, and examination of witnesses.
An example:
For example, a small and simple matter of Title Suit instituted by buyer in 1998 is still pending. The Suit is to seek registry of conveyance deed and re-possession. The petition is fully supported by written agreement duly signed by vendors, buyer and witnesses, evidence of payment duly recorded by vendors, payments made in few installments over a period of about six month all made by A/c payee cheques , evidence of possession given by vendor in 1993 duly recorded on the bottom of agreement with witness.
The vendor took back forcefully possession in 1998 by putting lock on lock of the room. The Buyer has to institute title suit to recover possession and seek registry of conveyance deed. But the vendor is denying the same by making false and cooked story on the ground that vendor (two brothers) had no right to sell the property, amount received was loan taken in duress etc.
The grounds taken by the vendor are totally false and frivolous, but by adopting delaying tactics they are continuing in possession of property which they sold in 1993 for full consideration received. In meanwhile one of vendor died. The Buyer requested to substitute his legal heirs as defendant, it was not allowed by court merely because buyer was unable to give exact date of death. On request of buyer (Plaintiff) the court directed the other opposite party) defendant to provide name of all legal heirs of his deceased brother and the date of death. But he did not provide the same in compliance of court directions. Rather he took pleading that the case abate because the plaintiff has not provided the date of death of defendant which is necessary to substitute legal heirs as defendants. And court willingly passed order of abatement.
Now the buyer had to search out date of death of deceased defendant, provide the same with names of his legal heirs and make an application for cancellation of abatement and restoration of suit with substitution of names of legal heirs. In the meanwhile the second vendor also died, the buyer is vigilant and aware of his death because he was in neighborhood so made application for substitution of his legal heirs. This was allowed, but cancellation of abatement and substitution of names of first defendant is still pending. This shows that how dishonest people, are gaining benefit of slow proceedings in courts- a property purchased in 1993, remained in possession of buyer till 1998 (more than five years), vendor took back possession in 1998 and holding the same till now – more than fifteen years.
A criminal case was also launched against vendors, for cheating but it was rejected holding that this is a civil matter and not a criminal matter ignoring the fact that vendors sold property, took back possession forcefully, did not register conveyance deed and now they themselves say that they have no right to sell. If so, why they sold property – selling property which one cannot is definitely a case of cheating. But a criminal complaint was rejected. Furthermore one cannot take two course of action- one keeping criminal case alive and pursuing title suit. Therefore, the buyer had to institute title suit in 1998 and suffer due to prolonged court proceedings.
This case could be disposed off within 6-9 month, but it is pending for about 15 years.
About cases of crime against woman and other real crimes:
Police can easily hold hands on accused in case of deemed crimes like complaints against tax payer, company director, cheque drawer etc. because they know whereabouts and police can exercise power over them easily, and can threaten them effectively , as per public feelers can also extort money.
Whereas, to put hands on real criminals is difficult and time consuming because where about of real criminals are fast changing, and sometimes police can also be afraid of real hard core criminals.
In case of crime against woman also it is feeling that dishonest woman are gaining benefit of law in favor of woman, whereas honest woman are still suffering and cannot take advantage of the law due to fear of police, advocate of opposite party, adverse publicity etc.
The consequences of above suggestions:
In case my suggestions (these are suggestions of public at large also) can be implemented, the police and courts will have more time to book real criminals timely and effectively- this will reduce crimes.
If honest people and public at large have no fear of police and court proceedings, the public will willingly come forward to help police and courts in booking criminals- at present generally people are forced just to keep eyes and mouth shut and avoid becoming complainant, witness or approver etc. this must come to an end and public must find more confidence in police, administration and courts.
I hope the above words which represent feelings of honest and law abider people need to be considered in proper perspective by law maker, law enforcing agencies and courts.
Request to readers:
Readers are requested to post their comments as soon as possible and also write on the subject.
Dated: – January 8, 2013