Outcomes on Non Deduction or Deposit of TDS
Need to Know about Consequences on Non Deduction or after deducting the same neglects to Deposit it to the credit of Government’s account.
A deductor would confront the accompanying consequences in case he neglects to deduct TDS or after deducting the same neglects to store it to the credit of Central Government’s account:-
- Disallowance of Expenditure
- Levy of Interest
- Levy of Penalty
A) Disallowance of Expenditure
According to section 40(a)(i) of the Income-tax Act, any amount (other than pay) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the beneficiary, will not be permitted to be deducted in case it is paid without deduction of tax at source or if tax is deducted yet isn’t stored with the Central Government till the due date of filing of return.
However, if tax is deducted or deposited in upcoming year, all things considered, the expense will be permitted as deduction in that year. Likewise, according to section 40(a)(ia), any whole amount payable to a resident, which is subject to deduction of tax at source, would pull in 30% disallowance in case it is paid without deduction of tax at source or if tax is deducted yet isn’t stored with the Central Government till the due date of filing of return.
However, where in regard of any such amount, the tax is deducted or saved in the consequent year, as it may be, the expenditure so disallowed will be permitted as deduction in that year.
According to Section 58(1A) (as amended with impact from the assessment year 2018-19), the arrangements of section 40(a) (ia) and 40(a)(iia) will likewise apply in processing the income chargeable under the head “Income from different sources”.
B) Levy of Interest
According to section 201 of the Income-tax Act, if a deductor neglects to deduct tax at source or after deducting the same neglects to store it to the Government’s account then he will be regarded to be an assessee-in-default and subject to pay basic interest as given:-
(I) at 1% for consistently or part of a month on the measure 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 % for consistently or part of a month on the measure of such tax from the date on which such tax was deducted to the date on which such tax is really paid.
C) Levy on Penalty
Penalty of an amount equivalent to tax not deducted or paid could be given under section 271C .
Cures Available
A deductor who fails to deduct the entire or any part of the tax on the entirety amount paid to a resident or on the aggregate credited to the account of a resident will not be considered to be an assessee-in-default in regard of such tax if such resident–
(I) has outfitted his return of income under section 139 ;
(ii) has considered such whole amount for calculating income in such return of income; and
(iii) has given tax due on the income declared by him in such return of income,
also, the deductor outfits a certificate with this impact in Form No.26A from a chartered accountant.
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