Interest Liability for TCS Assessee-in-Default

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A TAN holder who fails to collect whole or any part of the tax at source is treated as an assessee-in-default. But, as per provision in section 206C(6A) the TAN holder who fails to collect the whole or any part of the tax on the payment made to a payee shall not be considered to be an assessee-in-default in respect of tax not collected by him, if the following conditions are satisfied:

  • Payee has furnished his return of income under section 139
  • Payee has taken into account the above income in its return of income
  • Payee has paid the taxes due on the income declared in such return of income
  • Payee furnishes a certificate to this effect from an accountant in Form No. 27BA

In other words, in case of non collection of tax at source or short collection of tax, if all the discussed conditions are satisfied, then the payer will not be treated as an assessee-in-default. However, in such a case, even if the payer is not treated as an assessee-in-default, he will be liable to pay interest under section 206C(7). In this case, interest shall be payable from the date on which such tax was collectible to the date of furnishing of return of income by such resident payee. Interest in such a case will be levied at 1% for every month or part of the month.


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