A TAN holder who fails to deduct whole or any part of the tax at source is treated as an assessee-in-default. But, as per provision in section 201 the TAN holder who fails to deduct 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 deducted 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. 26A
In other words, in case of non deduction of tax at source or short deduction 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 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 resident payee. Interest in such a case will be levied at 1% for every month or part of the month.
Clarifications on new TCS provisions applicable from 1st October 2020