Section 271C of the Income Tax Act, 1961, outlines the penalties for failing to deduct or remit Tax Deducted at Source (TDS) as mandated by the Act.
The Supreme Court has clarified that penalties under Section 271C are specifically for failures to deduct tax at source and do not extend to delays in remitting TDS after deduction. In cases where TDS is deducted but remitted late, interest may be charged under Section 201(1A), but penalties under Section 271C are not applicable.
Key Provisions of Section 271C:
1. Failure to Deduct or Pay TDS:
- If a person fails to deduct the whole or any part of the tax as, then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which they failed to deduct.
2. Penalty Amount:
- The penalty imposed under Section 271C is equivalent to the amount of tax that was not deducted or paid. For instance, if ₹50,000 of TDS was not deducted, the penalty would also be ₹50,000.