Statutory provisions attracted on failure to deposit tax in government account after deduction

Where the employee has deducted the tax at source but failed to deposit wholly or partly, the tax so deducted in government account, the following statutory provisions are attracted:-

  • Interest u/s 201(1A)- The deductor is treated as an assessee in default and interest u/s 201(1A) is leviable @1.5% for every month or part of the 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. Further, the tax along with the simple interest u/s 201(1A) becomes a charge upon all the assets of the deductor.
  • Penalty u/s 221- Penalty to the extent of tax not deposited is leviable by the A.O. as discussed earlier.
  • Prosecution proceedings u/s 276 B- Where the deductor has failed to deposit tax deducted at source, in govt. a/c without a reasonable cause then he is punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.
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