Any tax deducted by a deductor from the payments made to deductees is like advance tax for the deductee for which the deductee gets the credit. The tax is deducted by the deductor and deposits the TDS to the government within the prescribed due date. The deductor needs to furnish TDS statement with the income tax authority within the prescribed due date and further issues TDS certificates to the deductee certifying the amount of tax deducted. This enables the deductee to claim the credit of TDS from the government against his tax liability. Similar is the provisions for TCS or tax collected at source.
Introduction
The Income Act, 1961 (“Act”) provides the aforesaid obligations on the deductor/collector of tax through various provisions and Income Tax Rules, 1962 (”Rules”) provides for due date for various compliances and the forms for such compliances. These are related to-
1. Due date for payment of deposit of TDS/TCS
2. Due Date for furnishing TDS/TCS Statements in the prescribed forms
3. Due Date for furnishing TDS/TCS certificates
4. Consequences on failure to comply these provisions
Provisions related to TDS
What is the time limit for payment of tax deducted from payments to deductees
As per section 200(1) and 200(2A), any tax deducted by the deductor from the payments made to the deductees shall be required to be deposited to the credit of the central government within the prescribed time limit.
Section 200(2A) applies to a government office whereas section 200(1) is applicable to other deductors.
Due date for payment of TDS from Salary Income and Non-Salary Income
Rule 30 of Income Tax Rules, 1962 prescribes the following time limit to deposit the tax deducted -
Thus in case of non-government deductors, the TDS is required to be paid by 7th day of the next month for the month when the tax is deducted except for the month of March of the previous year when the tax is deducted from March 1 to March 31 is required to be paid by 30th April of the next year. This shall apply for deduction of TDS from salary income u/s 192 as well as deduction of TDS from non-salary payment.
Due date for payment of TDS from Immovable Property u/s 194-IA
In case of deduction of income-tax under section 194-IA - TDS from immovable property shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made.
Due date for payment of TDS on Rent Payments by Individuals u/s 194-IB
In case of TDS on Rent Payments by Individuals u/s 194-IB shall be required to be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made. As per section 194-IB, tax shall be deducted in the month of March of the financial year or in the month of vacating the property.
Due date for payment of TDS on payments to contractors, etc. by Individuals u/s 194M
In case of TDS on payments to contractors, etc. by Individuals u/s 194M shall be required to be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made.
Quarterly payment of TDS
As per Rule 30(3), in special cases, the Assessing Officer may, with the prior approval of the Joint Commissioner, permit quarterly payment of the tax deducted under section 192 or section 194A or section 194D or section 194H and in such cases, the due date for quarterly payment of TDS shall be the 7th of the next month following the quarter ending month, except for the quarter ending in March for which the due date is 30th April, as given below-
The facility to deposit the TDS quarterly in special cases with the prior permission of the Assessing Officer is only available for tax deducted under the specified four provisions.
Prescribed Challan for payment of TDS
The TDS is required to be deposited by income-tax Challan No. ITNS 281. In case where the TDS is deposited electronically by online method, the same may be deposited by internet banking and Debit Card through NSDL portal.
Online Payment of TDS/TCS Challan
As per Rule 125 of the Income Tax Rules, 1962 (as amended by Notification No. 34/2008 dated 13.03.2008), the following persons are mandatorily required to pay tax electronically on or after the 1st day of April, 2008-
(a) a company; and
(b) any other person to whom the provisions of section 44AB (Compulsory tax audit) are applicable.
The expression "pay tax electronically" shall mean, payment of tax by way of—
(i) internet banking facility of the authority bank; or
(ii) credit or debit cards;
The Challan as given in the NSDL portal does provide any facility to pay the TDS by Credit Card, though specified in Rule 125. Hence, payment of TDS by credit card is not allowed.
Further, it is clarified by CBDT Circular No. 5/2008 dated 14.07.2008 that a taxpayer can make electronic payment of taxes from the account of any other person. However, the challan for making such payment must clearly indicate the PAN/TAN of the taxpayer/deductor on whose behalf the payment is to be made. It will not be necessary for the assessee to make payment of taxes from his own account in an authorized bank.
Due Date for filing of TDS Returns/TDS Statements
What is the time-limit for furnishing the TDS statements
At this juncture, it is important to know that the requirement to file TDS return has been dispensed with by the Income Tax Act from April 2005. From 1st April 2005, a deductor is required to furnish a quarterly statement of TDS with the income tax department and not any TDS return. Hence, contemporarily it is improper to call the same as TDS return but this is called as TDS Statements.
Section 200(3) casts an obligation on the deductor to furnish TDS statements to the income tax authority. According to section 200(3), every deductor is required to furnish a statement of tax deduction and deposit of TDS (commonly known as TDS return) in the prescribed form and within the prescribed time limit after paying the tax deducted to the credit of the Central Government within the prescribed time as detailed above.
Therefore every person deducting tax under various provisions of Chapter XVII, is required to furnish a TDS statement under section 200(3).
As per Rule 31A of Income Tax Rules, 1962, the TDS statement is required to be filed electronically with the Income Tax department.
Types of TDS Statements
Rule 31A(1) requires furnishing of TDS statements in the following forms for different categories of deductees-
Rule 31A(2) prescribes filing of quarterly TDS statements u/s 200(3) in Form No. 26Q/27Q and Form No. 24Q within the following time limits-
Manners of filing TDS statements
As per Rule 31A(3), the TDS statements may be furnished in any of the following manners, namely:—
(a) furnishing the statement in paper form;
(b) furnishing the statement electronically under digital signature in accordance,
(c) furnishing the statement electronically along with the verification of the statement in Form 27A.
Though there exists a rule for filing TDS statements in paper form, practically, it has become redundant.
In case of TDS on immovable property u/s 194-IA, TDS on Rent by Individuals u/s 194-IB and TDS u/s 194M, the TDS statements shall be filed in the following forms within the prescribed due dates-
It should be noted that Form No. 26QA, Form 26QB and Form 26QC are challan-cum-statement and hence the due date for payment of TDS and the due date for furnishing statements are identical.
Late fees for delay in filing of TDS statements (Section 234E)
As per section 234E, where a person fails to file the TDS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues. The amount of late fees shall not exceed the amount of TDS. The late filing fees shall be deposited before filing the TDS return. It should be noted that Rs. 200 per day is not penalty but it is a late filing fee.
Penalty for non-filing or delayed filing of TDS statement
Apart from late filing fees, a deductor shall be liable to pay penalty under section 271H. As per section 271H, where a person fails to file the statement of tax deducted at source on or before the due dates prescribed in this regard, then assessing officer may direct such person to pay penalty under section 271H. The minimum amount of penalty that can be levied is Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E.
Apart from delay in filing of TDS statements, section 271H also covers cases of filing incorrect TDS statements. Penalty under section 271H can also be levied if the deductor files an incorrect TDS return. In other words, minimum penalty of Rs. 10,000 and maximum penalty of upto Rs. 1,00,000 can be levied if the deductor files an incorrect TDS return.
However, no penalty under section 271H will be levied in case of delay in filing the TDS statements if following conditions are satisfied:
(i) The tax deducted at source is paid to the credit of the Government.
(ii) Late filing fees and interest (if any) is paid to the credit of the Government.
(ii) The TDS statement is filed before the expiry of a period of one year from the due date specified on this behalf.
It should be noted that the above relaxation is applicable only in case of penalty levied under section 271H for delay in filing the TDS statement and not in case of filing incorrect TDS statement.
Apart from above relaxation, in the following two cases the taxpayer can get relief from penalty under section 271H:
Under section 273A(4), the Principal Commissioner of Income-tax or Commissioner of Income-tax has power to waive or reduce the penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4) in this regard are satisfied.
Apart from shelter of section 273A(4), section 273B also provides immunity from penalty in genuine cases. As per section 273B, penalty under section 271H will not be levied if the taxpayer proves that there was a reasonable cause for failure.
No requirement to file TDS Returns (Section 206): From April 1, 2005, the requirement of filing of TDS returns has been dispensed with. As per new requirement, a deductor is required to file quarterly TDS statements only as mentioned above from April 1, 2005. There is no requirement to file any annual TDS returns.
What is the time-limit to issue the TDS Certificates
Every deductor deducting TDS under the provisions of Chapter XVII-B including section 192 is duty bound to furnish a TDS certificate to the deductees or payees in the prescribed time and in the prescribed form verified in the prescribed manner. [Section 203]
Rule 31 of Income Tax Rules, 1962 prescribes for furnishing of TDS certificates under section 203.
Rule 31(1) prescribes that the certificate of deduction of tax at source by any person in accordance with Chapter XVII-B or the certificate of payment of tax by the employer on behalf of the employee under sub-section (1A) of section 192 shall be in-
Apart from the above the Rules provide for issue of TDS certificates in the following forms for TDS on immovable property u/s 194-IA, TDS from rent payments u/s 194-IB and TDS u/s 194M-
Frequency of issuing TDS certificates
Rule 31(3) requires TDS certificate in Form 16 is required to be issued annually whereas TDS certificate in Form 16A is required to be issued quarterly. Further, TDS certificate in Form 16B, Form 16C and Form 16D is required to be issued after every submission of respective challan-cum-statements.
Due Date for furnishing TDS Certificates in Form 16/ Form 16A/ Form 16B/ Form 16C/ Form 16D
Form 16 is required to be issued annually within the below-mentioned time-limit-
As per Rule 31(3), TDS certificates in Form 16A are required to be issued quarterly within fifteen days from the due date for furnishing the statement of tax deducted at source under rule 31A.
The due dates for issue of TDS certificates in Form 16A are thus as given below-
The due dates for issue of TDS certificates in Form 16B/ Form 16C and Form 16D are as given below-
The TDS certificates shall be issued after generating and downloading the same from the TRACES portal and can be issued with manual seal and signature or with digital signature. [Refer Circular No. 03/2011 dated 13.05.2011]
The annual TDS certificate in Form 16 for TDS on salary may be issued with digital signature. [Refer Circular No. 02/2007 dated 21.05.2007]
Note: In case of -
(i) TDS on immovable properties u/s 194-IA
(ii) TDS on Rent Payments by Individuals u/s 194-IB
(iii) TDS on payments to contractors, etc. by Individuals u/s 194M
No TAN is required to be obtained by the deductor and TDS can be deposited with the PAN of the deductor
Penalty for delay in issuance of TDS certificates
Under section 272A, a penalty of Rs. 100 per day for each day of default shall be payable in case there is any delay in the issue of TDS certificates. The penalty shall begin from the expiry of the due date of furnishing the TDS certificates and shall continue till the date of actual issue of the TDS certificates.
Interest for Non-deduction of TDS or delay in payment of TDS
There can be two situations where interest is payable under the provisions of TDS.
One is for non-deduction of TDS from the payments made to the contractors.
The other one is for non payment of tax deducted from the payment made to contractors to the credit of the central government.
As per section 201, if any person who is liable to deduct tax at source does not deduct it or after so deducting fails to pay, the whole or any part of the tax to the credit of the central government, then, such person, shall be liable to pay simple interest as given below:
(i) Interest shall be levied at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax was deducted.
(ii) Interest shall be levied at 1.5% 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 was actually deposited to the credit of the Government.
In other words, interest will be levied at 1% for every month or part of a month for delay in deduction and at 1.5% for every month or part of a month for delay in remittance after deduction.
Interest in case no tax is deducted by the deductor but deductee pays the tax
As per section 201, a deductor who fails to deduct the whole or any part of the tax at source is treated as an assessee-in-default. However, the payer who fails to deduct the whole or any part of the tax on the payment made to a deductee (whether resident or non-resident) shall not be deemed to be an assessee-in-default in respect of tax not deducted by him, if the following conditions are satisfied:
(i) The recipient has furnished his return of income under section 139.
(ii) The recipient has taken into account the above income in its return of income.
(iii) The recipient has paid the taxes due on the income declared in such return of income.
(iv) The recipient furnishes a certificate to this effect from a Chartered Accountant in Form No. 26A. [Rule 31ACB]
In other words, in case of non deduction of tax at source or short deduction of tax, in case of a deductee, if all the conditions are satisfied, then the deductor will not be treated as an assessee-in-default. However, in such a case, even if the deductor is not treated as an assessee-in-default, he will be liable to pay interest under section 201(1A). In this case, interest shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such deductee. Interest in such a case will be levied at 1% for every month or part of the month.
Filing of TDS statement after payment of interest
As stated above, every deductor has to furnish quarterly statements in respect of tax deducted by him. As per section 201(1A), interest for delay in payment of TDS to the credit of the government should be paid before filing the TDS statement.
Interest for non-payment of tax amount as per demand notice
As per section 220(1), when a demand notice under section 156(1) has been issued to the taxpayer for payment of tax (other than notice for payment of advance tax), then such amount shall be paid within a period of 30 days of the service of the notice. In certain cases, the above period of 30 days can be reduced by the tax authorities with the approval of designated authorities.
Section 220(2) deals with payment of interest in case of failure to pay tax within the time specified in the demand notice. As per section 220(2), if the taxpayer fails to pay the amount specified in any notice of demand issued under section 156(1) within the period as allowed in this regard, then he shall be liable to pay simple interest at 1% for every month or part of a month. Interest shall be levied for the period commencing from the day immediately following the end of the period mentioned in the notice and ending with the day on which the amount is paid.
After processing of TDS statements (as per section 200A) an intimation is generated specifying the amount payable or refundable. Such intimation shall be deemed as notice of demand under Section 156. Failure to pay such tax specified in intimation shall attract interest under Section 220(2).
It is provided that where interest is charged under sub-section (1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under Section 220(2) on the same amount for the same period.
Disallowance of expenditure on failure to deduct tax or deposit the tax after deduction
Apart from interest and penalty for non-deduction of TDS from the payments made to contractors or sub-contractors, there is one more consequence that the deductor will face under the Income Tax Act, 1961.
Section 40(a)(ia) provides for disallowance of business expenditure in respect of payments made to the residents on which no tax is deducted or after deduction of tax, the same is not paid to the government.
From AY 2015-16 and onwards, section 40(a)(ia) of the Income Tax Act has been amended to provide that in case of non-deduction of tax at source or non-payment of tax so deducted on payments made to residents, the disallowance shall be restricted to 30% of the amount of expenditure claimed.
Prior to AY 2015-16, whole of the amount of such expenditure claimed was disallowed for the purposes of computing income under the head "Profits and gains of business or profession".
Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Act. Hence, the deduction of 30% of the amount of disallowed expenditure shall be allowed in the previous year in which the tax so deducted has been paid on or before the due date specified for filing of return of income under section 139(1).
Section 40(a)(ia) covers all expenditure on which tax is deductible from the payments made to residents including section 194C under Chapter XVII-B of the Income Tax Act.
No disallowance u/s 40(a)(ia) for short deduction: In the case of DCIT vs. M/s. S. K. Tekriwal (I.T.A No. 1135/Kol/2010), ITAT Kolkata has held section 40(a)(ia) provides for a disallowance if amounts towards rent etc. have been paid without deducting tax at source. It does not apply to a case of short-deduction of tax at source. As the assessee had deducted u/s 194C, it was not a case of “non-deduction” of TDS. If there is a shortfall due to difference of opinion as to which TDS provision would apply, the assessee may be treated as a defaulter u/s 201 but no disallowance can be made u/s 40(a)(ia). [Chandabhoy & Jassobhoy (ITA No. 20/Mum/2010) (ITAT Mumbai) followed]. The decision of the Tribunal was affirmed by Calcutta High Court in ITAT No. 183 of 2012 [CIT vs. S.K. Tekriwal reported in 361 ITR 432 (Cal)]
The position of allowability of expenditure claimed which is subject to TDS can be summarized as below-
Summary of TDS Due Dates
After discussing the various due dates of TDS compliances, the Summary of TDS Due Dates are given below-
TDS on immovable properties u/s 194-IA
TDS on Rent Payments by Individuals u/s 194-IB
TDS on payments to contractors, etc. by Individuals u/s 194M
Provisions related to TCS
Similar provisions exist for Tax Collection at source (TCS) which are discussed here.
What is the time limit for payment of tax deducted from payments to deductees
As per section 206C(3), any tax collected by the collector from the buyers under section 206C shall be required to be deposited to the credit of the central government within the prescribed time limit.
Due Date for payment of TCS
Rule 37CA of Income Tax Rules, 1962 prescribes the following time limit to deposit the tax collected -
In case of where the collector of tax is government, tax is required to be paid -
In case of non-government deductors, tax is required to be paid within one week from the last day of the month in which the collection is made. In other words, the tax is required to be paid on or before 7 days from the end of the month in which the collection is made.
Regarding the mode of payment, the provisions of Rule 125 shall equally apply in case of deposit of TCS by electronic mode of payments.
Unlike TDS, there is no relaxation given for the TCS for the month of March and the same needs to be paid by 7th April of the following previous year.
Interest for delay in deposit of TCS
As per section 206C(7), if the person responsible for collecting tax does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one per cent per month (1% p.m.) or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of section 206C(3).
Due Date for furnishing TCS Statements
Proviso to section 206C(3) requires that a person collecting tax on or after the 1st day of April, 2005 shall, after paying the tax collected to the credit of the Central Government within the prescribed time, furnish TCS statement in the prescribed form.
Rule 31AA prescribes for furnishing a quarterly statement of TCS in Form No. 27EQ within the following due dates-
As per Rule 31AA(3), the statement in Form 27EQ shall be required to be furnished electronically.
Due Date for TCS Certificates
Section 206C(5) casts an obligation on the collector of tax for furnishing TCS certificates to the buyer or licensee or lessee in respect of collection of tax in the prescribed form and within the prescribed time limit.
As per Rule 37D(1), the certificate of collection of tax at source under sub-section (5) of section 206C to be furnished by the collector shall be in Form 27D.
Further, as per Rule 37D(3), the certificate in the Form No. 27D shall be furnished to the collectee within 15 days from the due date for furnishing the statement of tax collected at source specified under sub-rule (2) of rule 31AA.
Summary of TCS Due Dates
After discussing the various due dates of TCS compliances, the Summary of TCS Due Dates are given below-
TCS Payment Due Dates
TCS statements filing due date and TCS certificates issue due date
TCS statements filing Forms
Read Also:
Is Interest paid on Late Deposit of TDS allowed as Business Expenditure u/s 37
Is there any Extension to TDS Return Due Date For Quarter 1 FY 2020-21
0 Comments