CA Siddhi Rajani

Nowadays delay in payment of TDS and in TDS return Filing makes an assessee liable to Late Payment Interest, Late Payment Penalty, Late Filing Fees, Late Filing Penalty and Further makes him liable to prosecution under the provision of the Income Tax Act, 1961. In this article we are discussing some of these provisions which makes it clear that TDS cannot be taken lightly and we should take utmost care in timely payment of TDS and filing of TDS return.

1. TDS payment and Return Filing

The provision of TDS is getting stringent and from now it is becoming very necessary for all to comply the same and understand the importance of TDS.

As per the provision of TDS is to be deducted on payment or credit whichever is earlier. So for e.g. If bill date is 15/4/18 amounting to Rs. 25000/- but advance payment is made on 05/04/2018 amounting to Rs. 85,000/- than TDS has to be deducted on Rs. 85,000/- on 05/04/2018 and to be paid either on same day or next day. Though the due date of payment is 7th of next month but that is not to be considered as due date, it is just grace days provided by department for the convenience of the assessee. Hence as soon as you deduct TDS it has to be paid. Even if we pay the TDS on 7th,the challan would get process with 24-48 hours as per banking terms. Hence as per Income tax department the date would not be considered as 7th but it would 8th or 9th as per the bank processing. Hence late payment interest would be charged for 2 months i.e. from date of deduction to date of payment.

If TDS is paid after 7th, Interest is charged at 1.5% p.m. (18% p.a.) from date of deduction till date of payment. For e.g. if TDS is deducted on 15th April and paid on 9th May than interest would be calculated for 2 months i.e. April and May. Hence, it is advisable to pay TDS on date of deduction itself rather than waiting for 7th of next month for payment. It is from now compulsory to pay online TDS for all corporate assessee and person other than corporate but covered under section 44ab(compulsory Tax audit) .Hence if the assessee does not have online payment facility kindly get the same.

2. Due Date chart for payment of TDS

S. No. Particulars Due Date
1 Tax Deductible in March 30th April
2 Other Months and Tax opted to be deposited by the employer 7th of next month

Even if PAN is incorrect, TDS @ 20% needs to be deducted. Hence, always take PAN copy of the party and file return. Now, only 2 digits and 2 letters of PAN are allowed to be changed in revised return which would cause more difficulties as if whole PAN is in correct it would be difficult to change the same. Hence from now it is advisable that PAN copies is taken from all clients and then send all details.

3. Due date of filing of TDS return

Quarter Form Nos. 24Q & 26Q Form No. 27Q Form No. 27EQ
April to June 31st July 31st July 31st July
July to September 31st October 31st October 31st October
October to December 31st January 31st January 31st January
January to March 31st May 31st May 31st May

However the above due date shall not apply to Form 26QB/26QC as in these cases challan of electronic deposit of TDS is itself considered as return.

4. Late TDS Return filing consequences

a. Fees for delay in furnishing the statements: (section 234E of Income Tax Act)

Effective from 1st July 2012, any delay in furnishing the eTDS statement will result in a mandatory fees of Rs. 200 per day, the total fees should not exceed the total amount of TDS made for the quarter. The late filing fee should be paid before filing such delayed eTDS statement.

b. Penalty for failure to furnish statements and furnishing incorrect statements: (section 271H of Income Tax Act)

Failure to file eTDS statement delaying more than an year or furnishing incorrect details in the statement filed like PAN, Challan and TDS Amount etc, will result in a penalty ranging from Rs. 10,000 to one lac.

5. Due date for furnishing TDS certificate

Due date for furnishing TDS certificate to the employee or deductee or payee is revised as under :

Sl. No. Category Periodicity of furnishing TDS certificate Due date
1. Salary (Form No.16) Annual By 15th day of June of the financial year immediately following the financial year in which the income was paid and tax deducted
2. Non-Salary (Form No. 16A) Quarterly Within fifteen days from the due date for furnishing the ‘statement of TDS’

Failure to issue TDS certificate within the time allowed, attracts penalty of Rs. 100/- per day of default (Sec 272A(2)(g)). However, penalty will not exceed the amount of tax deductible or collectible, as the case may be.

As per Circular No. 01/2012 dated 09.04.2012, it mandatory for all deductors to issue TDS certificate in Form No. 16A after generating and downloading the same from TRACES website.

6. TDS chart for the F.Y. 2018-19

Section 192 Payment of Salary and Wages
Criterion of Deduction TDS is deducted if the estimated income of the employee is taxable.Employer must not deduct tax on non-taxable allowances like conveyance allowance, rent allowance, medical allowance and deductible investments under sections like 80C, 80CC, 80D, 80DD, 80DDB, 80E, 80GG and 80U.No tax is required to be deducted at source if the estimated total income of the employee is less than the minimum taxable income (Rs. 2,50,000/- in case of Individual, HUF, AOP, BOD and AJP)
TDS Rate As per Income Tax, Surcharge and Education Cess rates applicable on the estimated income of employee for the year.
Section 192A(inserted wef june 2015) Payment of Accumulated Balance Due of Employees’ Provident Fund Scheme,1952 to employees
Criterion of Deduction Tax is to be deducted by the trustees of Employees’ Provident Fund Scheme,1952 or any other person authorised under the scheme to make such accumulated payments to employees and the amount of such payment is Rs 50,000 or more
TDS Rate In case of Resident Payee-10%(no surcharge or health and education cess)

In case of Non-Resident-10%(will be increased by surcharge and health and education cess)

7. TDS Rates on Payments other than Salary and Wages to Residents/Non-Resident

Section For Payment of On Payments Exceeding Individual / HUF Others
193 Interest on Securities Rs. 5000/-

However the limit is Rs 10,000 for the securities mentioned below:

i) Any security of the central government/state government

ii) 8% savings taxable bond,2003

iii) Wef 1st April,2018 on 7.75% savings (taxable) Bonds, 2018

 

10% 10%
194 Deemed Dividend Rs 2500 10% 10%
194 A Interest other than on securities by banks Rs. 10000/-

However this limit has been increased to Rs 50,000 wef 1st April 2018 if the payee is senior citizen.

10% 10%
194 A Interest other than on securities by others Rs. 5,000/- 10% 10%
194 B Winnings from Lotteries / Puzzle / Game Rs. 10,000/- 30% 30%
194 BB Winnings from Horse Race Rs. 10,000/- 30% 30%
194 C Payment to Contractors / Sub-Contractors

 

Rs. 30000/- for single payment Rs. 1,00,000/- for aggregate
payment during Financial Year
1% 2%
194 D Payment of Insurance Commission Rs. 15,000/- 5% 10%
194DA Payment of Life Insurance Policy Rs 100,000 1% 1%
194E Payment to Non- Resident Sportsman / sports association/ entertainer 20% 20%
194 EE Payment of NSS Deposits Rs. 2500/- 10% NA
194 F Repurchase of units by Mutual Funds / UTI 20% 20%
194 G Commission / Remuneration on Sale of Lottery tickets Rs. 15,000/- 5% 5%
194 H Commission or Brokerage Rs. 15,000/- 5% 5%
194 I Rent of Land, Building or Furniture Rs. 180000/- 10% 10%
Rent of Plant & Machinery Rs. 180000/- 2% 2%
194 IA Transfer of Immovable Property (w.e.f. 01.06.2013) Rs. 50 lacs or more 1% 1%
194 IB

 

Payment made by the individual/Huf whose books of accounts are not required to be audit u/s 44AB in the immediately preceding financial year for rent on land or building to any resident .(w.e.f 1st june 2017) Rs 50,000 per month or part of the month 5% 5%
194 IC

 

Any person responsible for paying to a resident any sum by way of consideration( not being in kind)under a joint development agreement.

 

10% 10%
194 J Professional/ technical services, royalty Rs. 30,000/- i)10%

ii) 2% in case the payee is engaged in the business of operation of call centre

1i)10%

ii) 2% in case the payee is engaged in the business of operation of call centre %

194 J (1) Any remuneration / fees / commission paid to a director of a company, other than those on which tax is deductible u/s 192. 10% 10%
194 LA Compensation / Enhanced compensation on acquisition of certain immovable property. Rs. 2,50,000/- 10% 10%
194 LB Interest to non- resident by infrastructure 5% 5%
194LBA Income from units of business trust. TDS is applicable if a business trust distributes any income referred to in section section 115UA or to its unit holders being in the nature of Section 10(23FC) 10% (for resident) and 5% (for non- resident) 10% (for resident) and 5% (for non- resident)
Payment Received u/s 10(23FCA) – Rental Income received by the real estate distributed to the unit holders 10%(for resident) and 30% (Surcharge + HEC) {for non- resident} 10% (for Indian company) and 40% (Surcharge + HEC) {for foreign company}
194LBB Payment of income in respect of units of Investment Fund 10%(for resident) and 30%(Surcharge + HEC) {for non- resident} 10%(for Indian company)and 40% (Surcharge + HEC) {for foreign company}
194LBC Payment of income in respect of Investment Fund in securitization fund i. 25% (for resident individual / HU F)

ii. 30% (Surcharge + HEC) for non resident other than foreign company.

 

i. 30-For resident

ii. 40% (Surcharge + HEC) for foreign company

194LC Payment of interest on (approved by C.G) amount borrowed in foreign currency during 01.07.2012 to 01.07.2020) by a specified company or business trust to NON-Resident/Foreign company 5% (surcharge + HEC) 5% (surcharge + HEC)
194LD` Payment of interest To Foreign institutional Investors, qualified foreign investors between 01.06.2013 to 01.07.2020 5% (surcharge + HEC) 5% (surcharge + HEC)

Notes:

  • No surcharge or education cess is deductible / collectible at source on payments made to residents {Individuals / HUF / Society / AOP / Firm / Domestic Company) on payment of incomes other than salary or wages.However if the recipient is non resident the rate of TDS will be increased by surcharge or health and education
  • TDS at higher rate of 20% has to be deducted if the deductee does not provide PAN to the deductor.(section 206AA)
  • All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain Tax Deduction or Tax Collection Account Number (TAN).

8. Consequences of TDS defaults

Failure to deduct taxes or wrong deduction of TDS (non deposit, short deposit or late deposit):

Default/ Failure Section Nature of Demand Quantum of demand or penalty
Failure to deduct tax at source 201(1) Tax demand Equal to tax amount deductible but not deducted
201(1A) Interest @1 % p.m. of tax deductible
271C Penalty Equal amount of tax deductible but not deducted
Failure to deposit tax at source 201(1) Tax demand Equal to tax amount not deposited
201(1A) Interest @1.5% p.m. of tax not deducted
276B Prosecution Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine
Failure to apply for TAN No. u/s 203A 272BB Penalty Rs. 10000
Failure to furnish prescribed statements u/s 200(3) 272A(2)(k) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to issue TDS certificate u/s 203 272A(2) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount.
Failure to furnish statement of
perquisite or profit in
lieu of salary u/s 192(2C)
272A(2) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount
Failure to mention PAN of the deductee in the TDS statements and certificates 272B Penalty Rs. 10000

9. Request for TDS Refund

Now we can even get the refund of excess TDS paid by us in the following manner:

It is mandatory to register digital signature on TRACES to submit the refund request.

Request for refund can be submitted only if there is no outstanding demand against the TAN. Refund request can be submitted after total outstanding demand is closed.

A refund request can contain maximum of five challans. For claiming more challans, submit new request. Maximum refund amount will be the minimum challan balance amount in the challan history.

Available amount per challan must be greater than Rs.100/- Ensure that all statement in which the challan has been claimed have been processed before claiming refund for the challan.

Hence now it is becoming necessary to comply with the provisions of TDS timely and with extra care.

(Author may be contacted at casiddhirajani@gmail.com)

(Republished With Amendments)

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30 responses to “Don’t Take TDS Lightly”

  1. ankoshlath.ca@rediffmail.com says:

    I bought a under construction flat, whose value without GST is below Rs 50 Lacs, but value exceeds Rs 50 Lacs with GST.

    Should I deduct 1% TDS ?

    There is a CBDT circular which clarifies that TDS is to be deducted on amount excluding GST, if GST is indicated separately. While this circular clarifies the ‘quantum’ on which 1% TDS should be applied, but it is not clear whether or not GST should be excluded from consideration value for the purpose of scope TDS applicability (Rs 50 Lakhs threshold).

    Could you please share your opinion with a case law or guidance note (if any) issued on this matter.

  2. Kashyap Desai says:

    what reply i should give in case of my company has not deposited TDS and not issued form 16. I have filled return based on salary slips and i have received the intimation in tax U/S 143(1).
    I have to give answer on website against the order. What should be the language to respond the notice.

  3. Dhananjay says:

    Is interest charged if anyone deposited the cheque of tds as on 7th?

  4. sasibcom says:

    tds articale is very useful.

  5. ASHOK JAIN says:

    since AY 2005-2006 till 2012-2013 coca cola India pvt limited and Hindustan Coca cola brew ages p Ltd., has been depositing TDS into my PAN account amounting to Rs. around 5,70,000/-. Though I never has any kind of dealing with them. Please advice what action can be taken against them. On reporting the matter, they are trying to revise/rectify their TDS returns.

    thanks

  6. om prakash says:

    dear sir

    we can submit the tds in same date of deduction.suppose we have due the tds in 7th may 2015 and submit in same day .

    Thanks & Regards

    Om Prakash

  7. ghanshyam says:

    IF THE PAYMENT MADE ON 15th January, which due date for tds payment last date.

  8. HITESH K SOLANKI says:

    Dear Sir,

    I have deducted and file tds and on that default i have paid interest in 2 part and all shown under the etds return but , in the justification report full interest is shown as not paid kindly suggest what to do.

  9. anil says:

    Dear IT expert,

    My father had provided certain valuation services, for which he was paid the basic amount w/o service tax amount with a promise that the same will be deposited @10%. same has not been done, which we came to know when our IT return for refund of the said TDS was turned down. the said person is not responding to mails and reminders. what action cane we take and make the said defaulter to book for the alleged cheating and fraud ?

    anil;

  10. anil says:

    Deat IT expert,

    My father had provided certain valuation services, for which he was paid the basic amount w/o service tax amount with a promise that the same will be deposited @10%. same has not been done, which we came to know when our IT return for refund of the said TDS was turned down. the said person is not responding to mails and reminders. what action cane we take and make the said defaulter to book for the alleged cheating and fraud ?

    anil;

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