1. Disallowance of expenditure; u/s 40(a)(i) of and section 40(a)(ia), if Tax not deducted / not deposited till the due date of filing of return;

a. Payment to Non-resident ;100% expenses disallowed

b. Payment to resident ;30% expenses disallowed

However, if tax is deducted or deposited in subsequent year, the expenditure so disallowed shall be allowed as deduction in that year.

2. Interest  u/s 221 on TDS amount (default u/s 201A)

a. Non-deduction of TDS, (whole or part) ; 1% pm, from the date, the TDS was to be deducted to the actual date of deduction,

b. Non-payment of TDS ; 1.5% pm, From the date of deduction to date of actual payment

3. Penalty  & Prosecution;

a. u/s 271C for Non-deduction /non-payment of TDS;

Penalty of an amount equal to tax not deducted/paid could be imposed u/s 271C. However, the total amount of penalty shall not exceed the amount of tax in arrears.

b. u/s 234E for delay in filing TDS /TCS returns;

Penalty of Rs.200 / day, for the delay in filing TDS or TCS returns after the specified due date, However, such a penalty will not exceed the amount of TDS for which the statement was required to be filed.

c. u/s 271H for incorrect information/fails to submit return within due date;

Also, a penalty from Rs.10,000 to Rs.1 lakh is leviable u/s 271H if a company provides incorrect information or fails to submit the returns within the specified due date. This penalty will be charged in addition to the penalty u/s 234E.

Exception;   No penalty u/s 271H if the following conditions are satisfied:

a. The TDS is paid to the credit of the government.

b. Late filing fees and interest (if any) is paid

c. The TDS/TCS return is filed before the expiry of one year from the due date specified in this behalf.

d. Prosecution; u/s 276B; 

Punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, along with fine.

4. Mode of payment of TDS

a) E-Payment: All the corporate assesses

b) All assesses (other than company) to whom provisions of section 44AB applicable (i.e Tax Audit).

c) Physical Mode: By furnishing the Challan No. 281 in the authorized bank branch

Compiled by CA. M.S.Prasad,  FCA, MBA, LL.B, B.Com(H),

+91 88022 53937, 0120-713 8235, [email protected]

Disclaimer: This insight is meant for informational purpose only and should not be considered as an advice or opinion, or otherwise, whatsoever. Author does not intend to advertise its services through this insight, and not responsible for any error or omission in this insight or for any action taken based on its contents.

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  1. CA Gunjan Bhatia says:

    Interest on non payment of TDS mentioned in article 5% pm is this correct? In my opinion it is 1.5% pm from the date of deduction till the date of payment.

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April 2021