Failure to deduct taxes or wrong deduction of TDS (non deposit, short deposit or late deposit) :
| Default/ Failure | Section | Nature of Demand | Quantum of demand or penalty |
Failure to deduct tax at source | 201(1) | Tax demand | Equal to tax amount deductible but not deducted |
| 201(1A) | Interest | @1 % p.m. of tax deductible | |
| 271C | Penalty | Equal amount of tax deductible but not deducted | |
| Failure to deposit tax at source | 201(1) | Tax demand | Equal to tax amount not deposited |
| 201(1A) | Interest | @1.5% p.m. of tax not deducted | |
| 276B | Prosecution | Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine | |
| Failure to apply for TAN No. u/s 203A | 272BB | Penalty | Rs. 10000 |
| Failure to furnish prescribed statements u/s 200(3) | 272A(2)(k) | Penalty | Rs. 200 every day during which the failure continues subject to maximum of TDS amount |
| Failure to issue TDS certificate u/s 203 | 272(A)(g) | Penalty | Rs. 100 every day during which the failure continues subject to maximum of TDS amount. |
| Failure to furnish statement of perquisite or profit in lieu of salary u/s 192(2C) | 272(A)(i) | Penalty | Rs. 100 every day during which the failure continues subject to maximum of TDS amount |
| Failure to mention PAN of the deductee in the TDS statements and certificates | 272B | Penalty | Rs. 10000 |
For example, If TDS return is not filed within the specified due dates being 31st January, 2025 for the 3rd quarter corresponding to FY 2024-25, the major consequences would be levy interest.
However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J (a & b) in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. 1 Crore or Rs. 25 Lakh respectively in previous year, there is a requirement to deduct tax at source.
This post is a great reminder of how complex the TDS system can be for businesses. Keeping track of deadlines and ensuring correct deductions are made is key to avoiding these hefty penalties. What steps would you recommend for companies to ensure they’re always on track?
First of all TDS is not complicated – it is quite straight forward. Most important is the discipline element that must be strictly followed. Will suggest you to read the following blogs which recommends steps for always remaining on track: