Income tax returns (ITR) filing: On TDS, deductor faces these penalties for failing to deduct or deposit sums

Jul 18, 2018, 16:25 PM IST
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Income tax returns (ITR) filing: In this day and age, there are numerous cases of tax deducted at source (TDS) scams that are being reported. However, that carries a number of penalties. So, whenever a deductor fails to deduct TDS or does not deposit the same in the credit of Central Government’s account, then he or she faces these penalties:

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a) Income tax returns filing - Disallowance of expenditure: As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return. However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.

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Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance (refuse to allow) if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

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b)Income tax returns filing - Levy of interest: As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the Government’s account then he shall be deemed to be an assessee-in-default and liable to pay simple interest.

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This is how he must pay simple interest: (i) at one per cent 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 is deducted; and

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(ii) at one and one-half per cent 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 is actually paid.​

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c) Income tax returns filing - Levy of Penalty: Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C .

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