Tax Deducted at Source was introduced with the purpose of collecting tax from the source of income. According to this concept, a person, known as a deductor, is liable to make a payment of specific nature to another person, known as a deductee. A person called a deductee shall then deduct tax at source and transfer the amount to the account of the Central Government.
The person whose income tax is deducted at source would be entitled to a credit of the deducted amount on the basis of a TDS certificate that will be issued by the deductor or by Form 26AS.
Meaning of TDS
TDS (Tax Deducted at Source) is a concept where a specific amount is reduced at the time of making a particular payment like salary, rent, commission, professional fees, interest, etc.
The person that makes the payment deducts TDS, while the person that receives the payment pays tax. It lowers evasion of tax as the tax would be collected at the time the payment is made.
Every such assesse requires filing a TDS return who is liable for the TDS deduction. These returns shall be filed within particular time intervals, and information has to be submitted to the income tax (IT) authorities.
Such information will include details of Tax Deduction and Collection Account Number (TAN), TDS payment, the amount deducted, Permanent Account Number (PAN), nature of payment, etc.
Every taxpayer must be aware of the exact due dates for filing of the TDS returns otherwise they may have to deal with penalties and fines.
Payments on which TDS is deducted
Tax Deducted at Source (TDS) is deducted on the following types of payments:
- Salaries,
- Interest payments by banks,
- Commission payments,
- Rent payments,
- Consultation fees, and
- Professional fees
However, Individuals do not require to deduct TDS at the time of making payments such as rent or fees of professionals like lawyers and doctors.
Duties of Persons Liable to TDS Deduction
A person that deducts TDS is responsible for the following;
- Obtaining Tax Deduction Account Number and mentioning it in all of the documents that relate to TDS,
- Deduction of the TDS at the rate applicable,
- Depositing the TDS amount to the Central Government within the due date,
- Filing of TDS returns within the due date,
- Issuing the TDS certificate to the payee within the due date that is specified
Non-Filing of TDS/TCS Returns
Section 234E provides that the person that is required to collect/deduct tax deducted at source will be liable to a penalty of Rs 200/- (two hundred) per day until the date the TDS return is filed.
The deductor of TDS will be liable to pay a such fine for each day till such delay continues and until the fine amount becomes equal to the amount that such person was supposed to pay as the amount of TDS.
Consequences of Non-Payment of TDS/TCS
The person who fails at filing the statement for TDS/TCS may be directed by the Assessing Officer to pay a minimum penalty of Rs 10,000/- within the due date, which may be further extended to Rs 1,00,000/-.
The penalty that is levied u/s 271H is in addition to the fee that is levied for late filing u/s 234E
The exception to the Penalty (u/s 271H)
- The tax deducted at source or collected at source is paid to the credit that belongs to the Central Government,
- Late filing fees are paid to the credit of the Central Government,
- The TDS or TCS return is filed before the period of one year expires from the due date that is specified on this behalf
Prosecution
In case a person fails to pay TDS with the credit of the Government as required, then such person shall be punishable with imprisonment for a term of at least three months which may extend to seven years, and in addition to imprisonment, a fine can also be levied.
Penalty for Non-Payment of TCS
If the person fails to collect tax at source (TCS) and fails to deposit it with the government within the prescribed duration, then such a person will be required to pay interest at the rate of 1% per month or a part of it on the TCS amount.
The collector of tax is liable to pay interest on the due amount up to the date the tax gets actually paid, from the date on which such tax became due or collectible.
Is TDS paid monthly?
If the deductors (other than office of government) deduct TDS in any month, tax must be paid on or before 7th of the next month. However, the TDS deducted in the month of March can be deposited till 30th April. For TDS deducted on rent and purchase of property, the due date is 30 days from the end of the month in which TDS is deducted.
How is TDS calculated on salary?
TDS on salary is calculated according to the income tax slab applicable to the employee after adjusting all eligible deductions and exemptions. Salary is one of the incomes where the employer (deductor) deducts full tax liability as TDS.
Can I file TDS return after the due date?
You can pay TDS after the due date, however penalty of Rs 200 per day as per Section 234E needs to be paid. The deductor is liable to pay the penalty for every day during which the failure continues. However, the amount of late fees cannot exceed the TDS.
Also, penalty under Section 271H can be levied by the department which is in the range of Rs 10,000 – Rs 1,00,000. Penalty under this section is in addition to the late filing fees specified above under Section 234E.
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