Failure to deduct taxes or wrong deduction of TDS (non deposit, short deposit or late deposit) :
| Default/ Failure | New Section (IT Act 2025) | Old Section | Nature of Demand | Quantum of demand or penalty |
Failure to deduct and /or deposit TDS | 398(1) | 201(1) | Tax demand | Equal to tax amount deductible but not deducted |
| 398(3)(a)(i) | 201(1A) | Interest | @1 % p.m. of tax deductible | |
| 448 | 271C | Penalty | Equal amount of tax deductible but not deducted | |
Failure to collect and /or deposit TCS | 398(1) | 206C(6A) | Tax demand | Equal to tax amount not deposited |
| 398(3)(a)(ii) | 201(1A) | Interest | @1.5% p.m. of tax not deducted | |
| 476 | 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 | 468 | 272BB | Penalty | Rs. 10000 |
| Failure to furnish prescribed statements u/s 200(3) | 397(3)(b) | 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 | 467 | 272B | Penalty | Rs. 10000 |
Relating to which financial year are these legal provisions?
The article has now been updated with provisions as per the Income Tax Act, 2025, and the corresponding sections have also been mapped with the earlier Act for better clarity.
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: